TVBI Company Limited v World TV Limited
[2019] NZHC 246
•25 February 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2935
[2019] NZHC 246
BETWEEN TVBI COMPANY LIMITED
Plaintiff
AND
WORLD TV LIMITED
Defendant
Hearing:
Further submissions:
2 July 2018
25 September 2018 and 3 October 2018
Appearances
S Wroe and E Hong for the Plaintiff M Keall for the Defendant
Judgment:
25 February 2019
RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 25 February 2019 at 2.00pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Prestige Lawyers, Auckland S Wroe, Auckland
Fyers Joyce, Auckland M Keall, Auckland
TVBI COMPANY LTD v WORLD TV LTD [2019] NZHC 246 [25 February 2019]
TABLE OF CONTENTS
Background [5]
TVBI's claim and World TV's defence [11]
TVBI's reply [22]
The need for leave to apply for summary judgment [27]
Applications for summary judgment – legal principles [34]
The evidence for TVBI [38]
Ms Wan [38]
Supplementary affidavit by Ms Wan [40]Mr Ho [43]
Ms Wan's affidavit in opposition to World TV's third party joinder application [60]
The evidence for World TV [67]
First affidavit by Mr Gary Chang [68]
Ms Shilei Wu [100]
Jody Chang [107]
Second affidavit by Mr Gary Chang [113]The issues [118]
Issue (1) – Should leave be granted to TVBI to apply for summary
judgment? [120]
Issue (2) – Is it reasonably arguable for World TV that Mr Ho did not have authority to bind World TV when he signed the 2016 Agreements? [124]
Ms Wroe's submissions [125]
Mr Keall's submissions [142]
Mr Keall's additional submissions on the Bishop Warden case [151]Ms Wroe's reply submissions on the Bishop Warden case [156]
Discussion and conclusions on Issue (2) [158]
Issue (3) – If the 2016 Agreements are binding on World TV, has TVBI
sufficiently proved that World TV has no arguable defence as to the amount
claimed? [208]Ms Wroe's submissions [208]
Mr Keall's submissions [210]
Discussion and conclusion on Issue (3) [212]
Issue (4) — should the Court exercise its discretion against the entry of summary judgment? [217]
Result [218]
[1] The plaintiff (TVBI) seeks leave to apply for summary judgment, and asks for an order for summary judgment on its claims. Those applications are opposed by the defendant (World TV).
[2] World TV also applied for leave to join its former chief executive, Mr Henry Siu Shun Ho (Mr Ho), as a third party in the proceeding, on the basis that Mr Ho had purported to enter into certain contracts on World TV's behalf when he had no authority to do so. The third party joinder application was argued with the summary judgment applications, and I reserved my decision on all three applications.
[3] Mr Keall has since advised that Mr Ho was adjudicated bankrupt on 24 August 2018. In those circumstances World TV has abandoned its application to join Mr Ho as a third party.
[4]I now give judgment on TVBI's summary judgment applications.
Background
[5] The parties began a commercial relationship in or around 2000, when World TV offered SKY subscription services to subscribers in New Zealand. Mr Ho, who was then a director of World TV and its Chief Executive Officer and chairman, was responsible for purchasing broadcasting contents, and managing the relationship with TVBI.
[6] On 24 July 2012, Mr Ho negotiated three agreements with TVBI, granting World TV the right to broadcast TVBI's content free-to-air. The three agreements (collectively, "the 2012 Agreements") comprised a Programme Licence Agreement, a Materials Supply Agreement, and a Channels Supply Agreement.
[7] The parties signed three supplemental agreements on 27 May 2015, with Mr Ho again negotiating and signing the agreements on World TV's behalf.
[8] On 15 August 2015, the 2012 Agreements and the 2015 supplemental agreements expired.
[9] On 7 September 2016, three further agreements were signed (collectively, "the 2016 Agreements").
[10] TVBI says in its statement of claim that the 2016 Agreements included the following terms:
(a)TVBI to license certain TVBI programmes to World TV for broadcast, transmission and distribution on designated World TV channels;
(b)TVBI to carry designated World TV channels on TVBI's OTT ("over the top" streaming) services;
(c)World TV to act as an authorised agent to sell subscription packages offered by TVBI;
(d)World TV to pay the respective fees listed in the 2016 Agreements. The fees comprised a monthly payment of carriage fee, customer service support fee and marketing fee, monthly transmission fees, monthly licence fees, and a yearly payment reflecting agreed revenue sharing between the parties;
(e)any fees payable by World TV not paid within 14 days after due date would accrue interest at the rate of 1.5 per cent per month, compounded monthly, from due date until payment;
(f)TVBI was to arrange delivery of the OTT boxes to World TV at World TV's cost; and
(g)World TV was to reimburse TVBI for any expenditure paid by it on behalf of World TV.
TVBI's claim and World TV's defence
[11] TVBI alleges that although it has performed all of its obligations, and instructed its representative to pay for certain materials delivery costs payable by
World TV under the 2016 Agreements, World TV has failed to pay fees and has failed to reimburse TVBI for the costs of delivering the materials.
[12] TVBI made demand on World TV for the sum of NZ$878,297 on 21 July 2017. It says that Mr Ho then made several payment proposals, purportedly acting in his capacity as a director or World TV. TVBI says that as a result of the settlement negotiations that followed, World TV agreed to settle one third of the outstanding amount by 10 September 2017. That arrangement was confirmed by letter dated 6 September 2017. By then, it says that the total outstanding amount was NZ$1,006,897. TVBI demanded payment of NZ$335,632 by no later than 10 September 2017.
[13] TVBI says that World TV failed to make the agreed payment by 10 September 2017. On 3 October 2017, it gave notice that the 2016 Agreements would be terminated on 5 October 2017 as a result of World TV's failure to remedy the alleged breaches.
[14] At the hearing, Ms Wroe calculated TVBI's claim at $1,342,907.22, made up as follows:
(a)
Outstanding fees and disbursements
$1,012,471.00
(b)
Interest at the contractual rate of 1.5 per cent compounded monthly on the principal sum, calculated to 2 July 2018
$295,173.78
(c)
Pre-litigation costs, claimable by TVBI under cl. 16(b)(xi) of the 2016 Agreements
$8,218.50
(d)
Costs (on a 2B basis) and disbursements
$27,043.94
[15] In addition, TVBI asks for an inquiry into further damages arising from World TV's alleged breach of contract.
[16] In its statement of defence, World TV denies that it entered into the 2016 Agreements. It says that Mr Ho lacked actual or ostensible authority to enter into the 2016 Agreements on its behalf, and TVBI knew or ought to have known that that was the case. It says that the board of World TV did not become aware of the terms of the
2016 Agreements until Mr Ho ceased operating as its Chief Executive Officer in mid-2017.
[17] World TV admits that it has not paid the various fees and disbursements claimed by TVBI, and contends that it has no obligation to pay those amounts. In the alternative, it says that it has insufficient knowledge and particulars of the extent to which the fees and disbursements claimed relate to the alleged delivery of materials by TVBI in relation to the 2016 Agreements, or the extent of the alleged deliveries. It puts TVBI to proof in relation to those allegations.
[18] World TV also denies that Mr Ho had any authority to negotiate the settlement alleged by TVBI. TVBI knew or ought to have known that Mr Ho ceased being the CEO of World TV in mid-2017, and ceased being a director of World TV on 12 July 2017. It says that it only learned of the purported settlement arrangements when it received a letter from TVBI on 6 September 2017. It denies that it authorised or approved any of the 2016 Agreements, or any settlement.
[19] As for TVBI's purported cancellation of the 2016 Agreements, World TV says that the termination notice was of no consequence in circumstances where there were no valid agreements to terminate. But if (contrary to that contention) valid contracts between TVBI and World TV did exist in early October 2017, it accepts that TVBI's letter of 3 October 2017 was effective to terminate the 2016 Agreements, with effect from 5 October 2017.
[20] World TV pleads the following particulars in support of its contention that TVBI knew or ought to have known that Mr Ho did not have the requisite authority to enter into the 2016 Agreements:
(a)At material times, it was objectively inconceivable that a majority of World TV's directors or shareholders would have approved the terms of the 2016 Agreements. Those terms were patently uneconomic for World TV, in that they required it to pay onerous fixed monthly payments for the duration of a three-year term for rights that entailed minimal commercial value.
(b)The contents of the 2016 Agreements were in the nature of a major transaction requiring board approval and/or a special resolution of the shareholders of World TV.
(c)The signing of the 2016 Agreements was not preceded by negotiations involving World TV's board or any of its shareholders, other than Mr Ho. There were no communications of any kind between TVBI and World TV's Board.
(d)There is no evidence that at any time World TV's board or any of its shareholders had approved the 2016 Agreements by way of minute, special resolution, or otherwise.
[21] World TV says that similar considerations apply to the purported settlement negotiations in or around July and August 2017: there were no negotiations involving the board of World TV or any of its shareholders (other than Mr Ho), and indeed no communications between TVBI and anyone but Mr Ho.
TVBI's reply
[22] TVBI repeated its assertion that Mr Ho had actual or ostensible authority to enter into the 2016 Agreements on behalf of World TV. It referred to the history of dealings between the parties going back more than 10 years, in which multiple agreements had been entered into, with Mr Ho representing World TV. It said that the 2016 Agreements were entered into in the usual course of dealing between the parties, and that it had a reasonable basis to believe that Mr Ho had actual authority to enter into the 2016 Agreements: he was the CEO and a director of World TV, and the relevant dealings which he conducted fell within the usual authority of those roles.
[23] TVBI said that Mr Ho used World TV's email at all material times when communicating with it. Also, in performing its obligations under the 2016 Agreements, it communicated with other staff members at World TV who did not raise any issue about the existence or validity of the 2016 Agreements.
[24] TVBI said that its programmes were broadcast on World TV's designated channels, and advertised on World TV's website. TVBI arranged delivery of the OTT boxes to World TV, and World TV duly accepted delivery. There were also communications between TVBI and World TV's accounts department in relation to the payments to be made by World TV under the 2016 Agreements. The validity of the 2016 Agreements was not disputed until the commencement of this proceeding.
[25] With reference to the negotiations with Mr Ho in July and August 2017, TVBI said that it was never aware during the negotiations that Mr Ho had ceased being CEO and a director of World TV.
[26] TVBI generally denied the affirmative allegations in World TV's statement of defence.
The need for leave to apply for summary judgment
[27] Rule 12.4(2) of the High Court Rules 2016 provides that an application by a plaintiff for summary judgment may be made at the time the statement of claim is served on the defendant, or later with the leave of the Court. In this case, TVBI did not apply for summary judgment when it filed its claim, so it is necessary for it to obtain leave.
[28] The learned authors of McGechan on Procedure note that no guidelines have been laid down for granting leave under r 12.4(2). They note that the question is clearly discretionary, and that the onus is on the party applying for leave to show why it should be granted. They suggest that if the absence of a defence has only become apparent after discovery or the exchange of briefs, that might well be an adequate reason for granting leave. They note that in many cases the leave question will be bound up with the merits, and that it may be difficult to determine the leave question without some consideration of the merits.1
1 McGechan on Procedure (looseleaf ed, Thomson Reuters), at HR 12.4.01A.
[29] The Court of Appeal has held that the granting of leave under r 12.4(2) should not be treated as a formality, and that the leave application should be heard as a separate application.2
[30] In her submissions, Ms Wroe advised that no application for summary judgment was made at the outset because it was not then clear exactly what World TV's position was in relation to the outstanding fees. Several concerns had been raised in discussions before the proceeding commenced, without any clarity as to World TV's reasons for refusing to pay. The prospect of a successful summary judgment application only became apparent after World TV's position had been clarified in the proceeding (including by the filing of its statement of defence). TVBI concluded from World TV's documents that the principal issue (Mr Ho's authority to bind World TV) was capable of being dealt with on a summary judgment application.
[31] TVBI has also obtained further evidence. It obtained an affidavit from Mr Ho, in which he has said that he had authority to enter into the 2016 Agreements on behalf of World TV. The affidavit covers the procedures which took place before the 2016 Agreements were signed, and World TV's knowledge of its obligations to pay the outstanding fees. It also asserts that Mr Ho had authority to negotiate the settlement in 2017.
[32] Ms Wroe submitted that, given the further evidence TVBI has obtained, there is no real question to be tried, and the merits of TVBI's claim are clear: there is no real defence.
[33] In its notice of opposition, World TV opposed both the application for leave to apply for summary judgment, and the application for summary judgment itself, on the grounds set out in World TV's statement of defence and in its various affidavits filed in opposition to TVBI's applications.
Applications for summary judgment – legal principles
[34]Rule 12.2 of the High Court Rules materially provides:
2 Stephens v Barron [2014] NZCA 82.
12.2 Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
…
[35] The proper approach to be taken to such applications was considered by the Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:3
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Young v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[36] The Supreme Court has held fairly recently that the fact that the Court may be required to determine questions of law does not preclude summary judgment. In Zurich Australian Insurance Ltd v Cognition Education Ltd, the Court said:4
… in other situations falling within the broad test (that is, the "no arguable defence" test applied on summary judgment), there will be what can properly be described as "disputes" even though they are ultimately capable of being determined by a summary process.
[37] To explain, it has been well established in New Zealand since Pemberton v Chappell that a court can properly determine questions of law on a summary judgment application, and that this includes issues of contractual interpretation. The Court of Appeal has accepted that such a determination may be made even though the question of law is difficult and requires argument (including reference to authority). In International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd, a case under the old bill writ procedure, Cooke P, by analogy with the summary judgment procedure which had just been introduced in New Zealand, said that where the facts were adequately
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
4 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 (footnotes omitted).
ascertained and the Court could be confident that the point at issue turned on pure questions of law or interpretation, it should be prepared "to determine, on adequate argument, even difficult legal questions". Similarly, in Jowada Holdings Ltd v Cullen Investments Ltd, McGrath J, delivering the judgment of the Court of Appeal, said that a court should be prepared to grant summary judgment "even if legal arguments must be ruled on to reach the decision".
[37] In the recent judgment of Associate Judge Osborne in McGuire v New Zealand Law Society, the Court noted that it will not attempt to resolve genuine conflicts of evidence or assess the credibility of statements in affidavits on a summary judgment application, but it will not hesitate to decide questions of law where appropriate.5 In assessing a defence, the Court will look for appropriate particulars and a reasonable level of detailed substantiation – the defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of its notice of opposition. The Court will take a robust approach, and enter judgment even where there may be differences on certain factual matters, as long as the lack of a tenable defence is plain on the material before the Court.6
The evidence for TVBI
Ms Wan
[38] The principal affidavit in support of the summary applications was that of Po Yee Karen Wan, assistant general counsel at TVBI.
[39] Ms Wan provided copies of the 2016 Agreements, and also provided copies of correspondence between TVBI and World TV in the period between 7 July 2017 and 12 October 2017. She confirmed that, despite repeated attempts to seek payment, World TV has not paid the sum claimed.
Supplementary affidavit by Ms Wan
[40] Ms Wan omitted from her February 2018 affidavit certain statements that are required of a party applying for summary judgment, namely a statement verifying the
5 McGuire v New Zealand Law Society [2018] NZHC 983 at [34].
6 At [34].
statement of claim, a statement that the plaintiff believes the defendant has no defence to the plaintiff's claim, and statements setting out the grounds for that belief.7
[41] When Ms Wroe was instructed for TVBI, she filed a memorandum dated 14 June 2018 seeking leave to file a further affidavit correcting the deficiencies. With the memorandum, she filed a further affidavit by Ms Wan verifying the contents of TVBI's statement of claim and deposing to TVBI's belief that World TV has no defence to its claims. Ms Wan's supplementary affidavit then set out the grounds for that belief as follows:
(a)Mr Ho signed the 2016 Agreements as Chief Executive Officer on behalf of World TV.
(b)Mr Ho was a director of World TV when he signed the 2016 Agreements.
(c)TVBI had a long-standing business relationship with World TV.
(d)TVBI had negotiated and dealt with Mr Ho over a 16 year period up to the date the 2016 Agreements were signed.
(e)TVBI had no reason to believe or suspect that Mr Ho was not authorised to enter into the 2016 Agreements on TVBI's behalf.
(f)TVBI performed all its obligations under the 2016 Agreements.
(g)In breach of the 2016 Agreements, World TV failed to pay the overdue fees and disbursements as claimed in TVBI's claim.
[42] Mr Keall did not consent to the leave sought by TVBI to file the supplementary affidavit. However, it seemed to me that the deficiencies in the original affidavit went only to matters of form, and that World TV could not contend that it would be
7 High Court Rules 2016, r 12.4(5)(b).
prejudiced if the affidavit were accepted. At the hearing on 2 July 2018, I accordingly granted leave to TVBI to file Ms Wan's supplementary affidavit.
Mr Ho
[43] Mr Ho became a director of World TV in 1998. He said that during his time at World TV he was tasked with the responsibility of purchasing broadcasting content from TVBI, and managing World TV's relationship with TVBI as a business partner. He said that World TV's board of directors was fully aware of this.
[44] He confirmed that he entered into the 2012 Agreements on behalf of World TV, and also the supplemental agreements entered into in May 2015.
[45] Mr Ho said that the 2016 Agreements were the direct result of World TV's move from using the SKY digital platform to using TVBI's OTT platform, in March 2016. He said that was a major change for World TV, and public announcements were made about it.
[46] Mr Ho produced copies of a media kit issued in March 2016 by Asian Communications Media House Limited (ACom), which described ACom as "The Marketing Arm for [World TV]". The media kit described World TV as providing Asian immigrants with high-quality programmes through a multi-dimensional media mix of radio and tv broadcasts, the internet, and point-of-purchase digital screens. There were also locally produced news and public affairs programmes, which were said to serve as a bridge between New Zealand mainstream society and Asian communities.
[47] The media kit advised that World TV had moved its pay tv channels from SKY digital to TVBI's OTT platform, commencing 1 March 2016. The new technology would offer more channels to World TV's subscribers.
[48] Mr Ho said that the 2016 Agreements, when signed, were kept in World TV's accounts department, where other directors had access to them. He said that, given the fact that World TV broadcast content created by TVBI, and the longstanding
relationship between the two companies, the management of World TV was well aware of the existence of the 2016 Agreements, and the payment obligations thereunder.
[49] In support of his evidence that World TV's management was aware of its payment obligations under the 2016 Agreements, Mr Ho produced a copy of an email dated 12 September 2016 sent to TVBI by Shilei Wu of World TV's finance department. The email advised TVBI that World TV would be paying $58,300 that day, for services provided in March of 2016. The email described the payment as "Instalment No 1", corresponding to four identified invoices from TVBI. Mr Ho confirmed that the payment referred to in the email was made.
[50] Mr Ho said that World TV had some cashflow problems, and was not able to make timely payments under the 2016 Agreements. Because of the longstanding relationship between the companies, TVBI did not immediately threaten to terminate the 2016 Agreements, but it sent regular requests for payment of the outstanding amounts. The demands became more regular and intense from April 2017. Mr Ho said that World TV was aware of these demands at the time.
[51]TVBI made a formal written demand for payment on 7 July 2017.
[52] Mr Ho confirmed that he ceased acting as a director of World TV, and as World TV's CEO, on 12 July 2017. But given his longstanding relationship with TVBI, and given the fact that he still held nearly 15 per cent of World TV's shares, World TV's Mr Gary Chang asked him to help negotiate a settlement of TVBI's fees claim.8
[53] Mr Ho's evidence was that, having received instructions from Mr Gary Chang, he made a payment proposal to TVBI on behalf of World TV on 20 July 2017. He sent an email that day to Mandy Yip at TVBI, advising that he was organising directors' guarantees, and that he would then contact the bank to arrange drawdown of a loan which would cover half of the amount outstanding. He proposed that, after that,
8 Mr Chang's evidence is described later in this judgment. He deposed that he was one of the original founding directors of World TV in 1998, but ceased being a director (and Chief Operations Officer) on 15 April 2016. He was reappointed as Chief Operations Officer in October 2017, but was not a director of World TV in July – August of 2017, and is not currently a director.
World TV would carry on to pay the balance on a monthly basis of $53,000, until the full amount was paid.
[54] TVBI rejected the proposal by email dated 21 July 2017. TVBI's concerns were that there was no payment date commitment in Mr Ho's proposal, and that a verbal proposal Mr Ho had made earlier for payment of 50 per cent of the debt by 30 August was not acceptable to TVBI.
[55] Mr Ho made another proposal on 25 July 2017. Again, he said that he acted on instructions from Mr Gary Chang. Mr Ho's 25 July proposal involved clearing the amount owing by instalments of various amounts to be paid on or before 28 July [sic] 2018, 11 August 2017, 31 August 2017, and 30 September 2017. Thereafter,
$116,600 would be paid on or before the end of every month until the debt was cleared.
[56] TVBI responded with a counter-proposal on 30 August 2017. It is apparent from Ms Yip's email of that date that there had been some communications (including telephone discussions) since Mr Ho's 25 July email. Ms Yip's 30 August email attached a proposal for settlement of the outstanding amount claimed by TVBI, and major terms for a new contract between the parties. The outstanding amount as at 30 September 2017 was said to be NZ$1,003,897, and TVBI proposed payment of that amount by three equal instalments, on 10 September 2017, 10 November 2017, and 10 January 2018.
[57] Mr Ho's evidence was that he told Mr Gary Chang about this counter-proposal, and Mr Gary Chang initially agreed to it. However, about 10 days later Mr Chang told him that World TV would not be able to go forward with the payment plan. Mr Ho said that Mr Gary Chang asked him to speak to TVBI about that, and Mr Ho said that would be difficult, as TVBI had already approved the payment plan. Mr Ho said that he asked Mr Chang about when World TV would be able to make the first payment and Mr Chang said that it might be able to make the first payment in October 2017.
[58] Mr Ho said that he pressed Mr Gary Chang for an exact first payment date, but Mr Chang refused to commit to any firm date. He said that he conveyed Mr Chang's position to TVBI, but TVBI rejected it.
[59] After that, Mr Ho said that he was no longer engaged in any negotiations on behalf of World TV. Mr Gary Chang took over the negotiating.
Ms Wan's affidavit in opposition to World TV's third party joinder application
[60] Ms Wan said that TVBI did agree to provide a price concession to World TV, considering the latter company's financial difficulties in or around 2015, and having regard to the companies' long-standing relationship. Ms Wan described that concession as a one-off, which was never intended to affect future contracts between the parties. The concession was reflected in the supplementary agreements signed in May of 2015, and Ms Wan said it had little or no impact on the negotiations for subsequent contracts between the parties because the negotiations in September 2016 involved a new business model.
[61] Ms Wan produced with her affidavit copies of email correspondence between the parties in June 2016. In an email dated 6 June 2016, Ms Reginau Yu of TVBI's finance department told Mr Ho and Ms Nancy Cao (an assistant accountant at World TV before Shilei Wu took over that role in August 2016) that the amount for World TV to settle for the period December 2015 to May 2016 was $575,628. At the date of the email, Ms Yu said that TVBI had only received $275,788. Payment of the balance was sought immediately.
[62] In a second email from Ms Yu dated 14 June 2016, Ms Yu referred Mr Ho and Ms Cao to her email of 6 June 2016 and noted that no payment or response had been received. She asked for advice of payment status by return email.
[63] There was a further email dated 22 June 2016 from Mr Nic Cheung of TVBI to Ms Cao and Mr Ho, which referred to a meeting with Mr Ho and advice from him that a payment would be made within the week. Ms Cao replied on 23 June 2016 advising that two payments had been made to TVBI that day.
[64] Ms Wan also said that between September 2016 and 7 July 2017, TVBI made telephone calls to Mr Ho demanding payments. Her evidence was that there were also regular operations meetings between the companies, held by telephone conference. She said that, in the course of those meetings, TVBI made demand for payment, but World TV continuously sought extensions of time to make payment. Those extensions were granted (because of the long-standing business relationship between the parties and because World TV had made partial payments following the extensions), and TVBI did not see the need to make a formal demand before it made the 7 July 2017 demand.
[65] Finally, Ms Wan referred to a letter dated 14 November 2017 from TVBI's solicitors to World TV's solicitors. The letter denied the existence of any "side agreements" between TVBI and Mr Ho, and specifically said that TVBI never entered into any agreement with World TV or Mr Ho regarding the payment of licensing fees and facility fees only when World TV made a profit. The solicitors suggested that that contention (later referred to in Ms Wu's evidence) was an internal matter between World TV and Mr Ho. They said that TVBI had never entered into any additional agreements contrary to the 2016 Agreements.
[66] On the amount payable by World TV, TVBI's solicitors said that they could provide copies of invoices supporting the outstanding claims, but an itemised accounting of the amount owed would not be provided. They referred to the three licence agreements constituting the 2016 Agreements, which provided comprehensive details of the fees payable.
The evidence for World TV
[67] There were four affidavits in support of World TV's opposition, two by Mr Gary Chang, one by Ms Shilei Wu, and one by Mr Jody Su-Hao Chang (a director of World TV from 12 July 2017).
First affidavit by Mr Gary Chang
[68] Mr Chang set out details of the shareholding of World TV. At the date of his affidavit, 18.48 per cent of World TV was held by Fu-nu Tsai, and Mr Ho held
14.46 per cent. Mr Chang held the next largest parcel of shares, at 12.15 per cent. There were nine other shareholders holding various smaller percentages of the total shareholding.
[69] Mr Chang said that there are four current directors of World TV, including Jody Chang. A table produced by Mr Gary Chang shows that a number of directors either resigned or were removed on 15 April 2016, and others resigned or were removed on 12 July 2017. In addition to Mr Ho, Paul Liu and Mr Yau ceased being directors on 12 July 2017.
[70] Mr Chang referred to World TV's operations in New Zealand. From the beginning, it has purchased and broadcast in New Zealand Chinese language content from broadcasters on the Chinese mainland. At the time of his affidavit, the televised content provided by World TV was mainly free-to-air broadcasts. Between 2000 and 2017 World TV offered Pay TV subscriptions, mainly via SKY. Initially, TVBI was one of the channels offered to World TV subscribers.
[71] The annual cost of accessing the SKY digital platform was justified in the early days by the large numbers of subscribers, but by 2012 the financial viability of pay tv services was being steadily eroded by the growing quantity of screening content available on the internet, and competition from free-to-air Asian channels broadcasting via satellite. The impact of declining subscriber revenues was aggravated by the fixed costs to World TV of accessing SKY's digital platform: subscribers and revenue declined, while costs remained constant.
[72] The 2012 Agreements and the May 2015 supplemental agreements were signed at a time when Mr Ho was a trusted member of World TV's board, and its Chief Executive Officer. Mr Chang said that, at that time, World TV had no issue with Mr Ho negotiating contracts with TVBI: he kept the directors informed about his negotiations with TVBI, and the World TV board knew what the cost of the TVBI licences would be before the contracts were signed. The board was advised of the general nature of the contracts, and of the specific costs involved.
[73] The annual licensing fees payable over the three year term of the 2012 Agreements, combined with other costs payable under the 2012 Agreements, came to
$2,460,000 over the three year contact terms. World TV struggled to keep up with those payments, and Mr Chang said that Mr Ho was tasked with negotiating more lenient terms with TVBI and other providers.
[74] Against that background, Mr Ho advocated that World TV enter into direct licensing contracts with TVBI that would give World TV the right to broadcast TVBI content free-to-air. Mr Ho argued that the cost of those licences, which exceeded
$800,000 per year, would be justified as a way to promote World TV's pay tv services to new subscribers, and as a source of additional advertising revenue.
[75] Mr Chang said that Mr Ho reported to World TV's board on his efforts to negotiate fee reductions, on 26 June 2014. Those efforts eventually led to the three supplemental agreements signed by Mr Ho on World TV's behalf in May 2015. The main concession in the supplemental agreements made with TVBI was a $380,000 concession in relation to a sum of $840,000 due under one of the agreements comprised in the 2012 Agreements. That concession reduced the overall cost of the three TVBI contracts scheduled to finish in July 2015, from $2,460,000 to $2,000,080.
[76] Mr Chang said that, despite that concession, World TV's financial woes continued. He produced copies of World TV's financial statements for the years ended 31 March 2015, 2016, and 2017, showing that World TV made a loss of $139,905 in the year ended 31 March 2014, a loss $56,776 in the year ended 31 March 2015, a profit of $52,004 in the year ended 31 March 2016, and a loss of $2,822,378 in the year ended 31 March 2017.
[77] From about June 2015, Mr Ho began promoting the idea of transferring World TV's paying subscribers from SKY TV's digital platform to TVBI's digital platform. World TV subscribers would relinquish their SKY receivers, and use TVBI's OTT box. Mr Chang said that a number of the World TV board, including himself, became concerned about the proposal, as it would involve World TV handing over control of its valuable subscriber base to TVBI.
[78] By October 2015 World TV's pay tv business, which at the time included both SKY and TVBI content, was running at a big loss. However, Mr Ho advised on 30 October 2015 that the on-going costs of content had fallen dramatically since 30 June of that year. At a board meeting on 26 November 2015, Mr Ho advised that World TV would begin sending OTT boxes to customers for a one and a half month trial period. Mr Chang and a co-director, Mr Tai-sheng Lien, expressed concern that World TV would be reliant on TVBI's goodwill, as TVBI could easily decide to take over providing content to those World TV clients. Mr Ho's response was that the risk of that happening was not greater than with SKY, and that the OTT boxes would allow World TV to regain lost subscribers and stop losing money on pay-for-view channels. Mr Chang said that he strongly disagreed. World TV had contractual arrangements with SKY, but the TVBI contracts had expired and Mr Ho did not explain how the OTT boxes would allow World TV to regain lost subscribers.
[79] Mr Chang said that he eventually joined the other directors in approving the proposal, but continued to harbour misgivings about it.
[80] At the end of the meeting of 26 November 2015, Mr Ho advised the board that it would also be necessary to reduce operating expenses.
[81] In spite of the continuing concerns of Mr Chang and Mr Lien, and also co-director Fu-nu Tsai, World TV subscribers were transferred to TVBI's OTT platform from 1 March 2016. By 2017, when World TV ceased using TVBI's OTT platform, World TV had lost over 1,000 subscribers to TVBI.
[82] Mr Chang said that matters came to a head on 15 April 2016 when Mr Ho persuaded a majority of directors and shareholders to remove Mr Chang, Mr Lien, and Fu-nu Tsai as directors of World TV. The removal of those directors left the following directors comprising the board of World TV:
(a)Mr Ho;
(b)Paul Liu; and
(c)Sui-Kwong Samson Yau (who had been appointed on 13 September 2013).
These were the directors holding office when Mr Ho signed the 2016 Agreements.
[83] The 2016 Agreements obliged World TV to pay at least $2,268,000 over three years. That total sum was close to the $2,460,000 payable under the 2012 Agreements, but that had proved too much for World TV, and Mr Ho had ultimately been obliged to negotiate the $380,000 reduction agreed in May 2015. World TV's longstanding financial difficulties had not improved after May 2015, and losses increased dramatically in the financial year after Mr Ho signed the 2016 Agreements.
[84] Mr Chang said that World TV could find no evidence on its files that Mr Ho or anyone else at World TV conducted any kind of due diligence before the 2016 Agreements were signed on 7 September 2016. Also, the 2016 Agreements included a backdating element – Mr Ho was agreeing to pay eight months of arrears for TVBI products or services going back to February 2016. There was no suggestion that Mr Ho attempted to negotiate any of the terms of the 2016 Agreements.
[85] And nor is there evidence on World TV's files that Mr Ho discussed the 2016 Agreements formally or informally with the other two directors, Mr Liu and Mr Yau, before they were signed. The only directors' minute from 2016 appears to be the 15 April 2016 minute that detailed the expulsion of the directors who opposed Mr Ho (one of whom was Mr Chang). World TV's shareholders were not approached about the 2016 Agreements before they were signed, and there was no board resolution or shareholders' resolution approving the signing. Mr Chang compared this with the situation back in early 2009, when the minutes of board meetings showed that Mr Ho notified the board about the state of negotiations.
[86] Mr Chang said that the 2016 Agreements were not kept on file, and there is no record of any communication from TVBI about the 2016 Agreements before it made demand on 7 July 2017. No copies of the 2016 Agreements have been located in World TV's accounts department. Copies were only located, after TVBI made its
payment demand in July 2017, attached to an email TVBI had sent to Mr Ho at his World TV email address.
[87] By the middle of 2017, several of the shareholders were becoming concerned about the worsening financial position at World TV. Their concern resulted in a challenge to the leadership of Mr Ho and Mr Samson Yau. Four shareholders, who controlled over 50 per cent of World TV's shareholding,9 moved to have Mr Ho, Mr Liu and Mr Yau removed as directors. That occurred on 12 July 2017.
[88] Mr Chang said that TVBI's demand of 7 July 2017 came as a bolt from the blue. However, events unfolded rapidly, and the board was required to respond quickly to legal action Mr Ho took in an effort to regain a management and governance role at World TV. (Holding orders were made in this Court on 20 July 2017, pending the hearing of an application for an interim injunction on 3 August 2017. Mr Ho subsequently withdrew this proceeding).
[89] Specially in response to Mr Ho's affidavit, Mr Chang denied that Mr Ho had autonomy to contract with TVBI as he saw fit, without the knowledge and approval of World TV's board. Mr Ho was not authorised to sign the 2016 Agreements, and he did so without the knowledge or consent of World TV. Nor did World TV subsequently ratify or approve of those documents after they were signed.
[90] Mr Chang accepted that a decision to move from the SKY digital platform to TVBI's OTT platform was made on 1 March 2016, but at that time there was no contract between World TV and TVBI, and there was no indication from Mr Ho that he was intending to negotiate further TVBI contracts. He did not sign the 2016 Agreements until six months later.
[91] In response to Mr Ho's evidence about the public announcements and the World TV media kit, Mr Chang maintained the position that World TV was not aware of the 2016 Agreements. As far as World TV was concerned, the arrangements with TVBI had come to an end in July 2015 when the 2012 Agreements, as modified by the May 2015 supplemental agreements, expired.
9 Fu-nu Tsai, CTA Limited (Wan Hsu), Tony Kiam and Mr Chang.
[92] Mr Chang emphasised that, while the 2012 Agreements and the 2015 supplemental agreements had been concluded with the knowledge and approval of the World TV board, by the end of 2015 Mr Ho knew that Mr Chang and other directors and shareholders were uneasy, if not outright opposed, to shifting clients to TVBI's OTT platform.
[93] While Mr Ho said that World TV was experiencing cashflow problems after he signed the 2016 Agreements, Mr Chang's evidence was that Mr Ho was well aware of the existence of those difficulties long before the 2016 Agreements were signed.
[94]Mr Chang did not accept that the email of 12 September 2016, referring to the
$58,300 payment "for period of March", meant that World TV was somehow aware of the 2016 Agreements Mr Ho had signed, or that the payment related to the 2016 Agreements. The first demand for payment from TVBI that World TV is aware of was the 7 July 2017 demand.
[95] On the issue of the July/August 2017 negotiations, Mr Chang denied that he asked Mr Ho to help negotiate a settlement with TVBI. He pointed out that he was not re-appointed chief operations officer of World TV until October 2017, and he had ceased being a director of World TV in April 2016. Also, he and Mr Ho were heavily involved on opposite sides of the High Court litigation Mr Ho had commenced in 2017. Mr Chang said World TV was not aware of the settlement communications between Mr Ho and TVBI; they were undertaken without Mr Chang's knowledge or authority.
[96] Mr Chang acknowledged that World TV received the letter dated 3 October 2017 from TVBI giving notice of termination of the 2016 Agreements. He said that this was the first communication received by World TV from TVBI after the 7 July 2017 demand. World TV's director, Jody Chang, replied the same day to TVBI. Jody Chang advised that the current board of World TV had agreed to pay for all of the outstanding amounts since World TV's new management took over. That meant all outstanding amounts since August 2017. As for amounts outstanding before August 2017, he told TVBI that World TV needed to investigate and look into all the communications between TVBI and Mr Ho before it could make any decisions.
[97] Jody Chang's letter of 3 October 2017 raised concerns about the involvement of a private company owned by Mr Ho called International View Limited (IVL). The letter alleged that TVBI had paid $1,000,000 to IVL, and that Mr Ho had admitted that payment was made. However, Mr Ho had never explained the purpose of the payments. The letter expressed the view that any transactions between Mr Ho and TVBI would seem to be a direct conflict of interest (having regard to Mr Ho's position at World TV). The current board of World TV wanted an explanation for these payments.
[98] Jody Chang's letter of 3 October 2017 also pointed out that TVBI appeared to have allowed Mr Ho not to pay the amounts claimed to be due to TVBI for over a year, but as soon as the new management stepped in at World TV, TVBI immediately started taking drastic actions to chase World TV for the outstanding bills.
[99] Mr Gary Chang provided with his affidavit correspondence between the solicitors in the period 26 October 2017 to 21 November 2017.
Ms Shilei Wu
[100] Ms Wu said that she had been working at World TV for about three years. She became an assistant accountant in about August 2016. She said that she had read the affidavits of Ms Wan and Mr Ho.
[101] Ms Wu said that she had not previously seen any of the documents provided with Mr Ho's affidavit, other than the 13 September 2016 email written by her, in which she advised TVBI that World TV would be paying $58,300 to it that day.
[102] With regard to that email, she said that on 12 September 2016 Mr Ho asked her to pay an invoice from TVBI. She recalled that the invoice had arrived the previous month. Once she had paid the invoice, Mr Ho asked her to send an email to TVBI confirming payment. That is the email she sent on 12 September 2016. She said there was no other discussion about the invoice.
[103] Ms Wu said that she did not have any discussions about TVBI with anyone other than Mr Ho at World TV, and she did not recall Mr Ho talking to anyone else
about TVBI. As far she knew, no one else at World TV knew about the payment made to TVBI in September 2016, other than Mr Ho and herself.
[104] Mr Ho told Ms Wu that World TV had contracts with TVBI, but she never saw any of those contracts. However she did recall Mr Ho giving her an envelope to file that he said contained the TVBI contracts. She filed the envelope, but did not open it or examine its contents.
[105] Ms Wu referred to a discussion with Mr Ho in early 2017, in which he told her there was an annual licensing fee of $400,000 payable to TVBI and an annual facility fee of $300,000. She said that Mr Ho asked her to exclude the licensing fees from World TV's accounts, as they were not payable until there was a profit from that part of the business. Ms Wu said that she complied with that request, as she had no reason to question what Mr Ho was telling her.
[106] Ms Wu said that she had not seen any of the documents attached to Ms Wan's affidavits (which included email correspondence between Mr Ho and TVBI) until she read that affidavit.
Jody Chang
[107] Jody Chang was one of the directors appointed to the board of World TV on 12 July 2017.
[108] Jody Chang confirmed the contents of the affidavit of Mr Gary Chang, and that the only copies of the 2016 Agreements that the board of World TV was able to locate were those attached to an email sent to Mr Ho at his World TV email address.
[109] Jody Chang also confirmed that the demand for payment made by TVBI in July 2017 came as a surprise to World TV – they had not found any communications between TVBI and World TV before that time.
[110] When Jody Chang sent the letter of 3 October 2017 to TVBI, the new board at World TV was still going through the process of working out how the 2016 Agreements had come into existence, why Mr Ho had signed them, and why it had
taken TVBI so long to demand payment. World TV was also looking at the nature of the dealings between TVBI, Mr Ho, and companies controlled by Mr Ho.
[111] Jody Chang confirmed that Mr Ho had no authority from anyone at World TV to communicate with TVBI or undertake the negotiations on behalf of World TV after 12 July 2017. World TV had no idea what Mr Ho was purporting to represent on behalf of World TV after that date.
[112] Jody Chang's understanding is that the debt claimed by TVBI was included in World TV's 31 March 2017 financial statements for accounting purposes. World TV's advice was that that position would be reversed or altered in the 31 March 2018 financial statements if the Court determined that the sum is not due and payable, or that a different amount is due and payable.
Second affidavit by Mr Gary Chang
[113] Mr Chang provided a second affidavit, sworn in reply on World TV's application to join Mr Ho as a third party.
[114] Mr Chang said that the fees concession granted in the May 2015 supplemental agreements was the direct result of long-standing financial difficulties at World TV that carried on throughout 2016 and 2017. He took Ms Wan's reference to a "new business model" to be a reference to the use of TVBI's OTT set-top boxes in place of the digital SKY platform, and said that if that was the "new business model" it did not alter the extent of World TV's on-going financial difficulties in September 2016 or at any other time.
[115] Mr Chang noted that the communications between the parties in June 2016 pre- dated the 2016 Agreements. Also, the evidence of payments attached to the last of the emails (showing payments to TVBI of NZ$46,000 and $6,083.30), was not referable to any known contract between World TV and TVBI. In Mr Chang's view, the June 2016 communications showed that TVBI and Mr Ho were very much aware that World TV was unable to keep up with TVBI's demands for payment, just a few months before the 2016 Agreements were signed.
[116] Mr Chang did not accept that the telephone calls Ms Wan referred to in the period September 2016–7 July 2017 actually occurred, particularly as Ms Wan provided no information as to who made the alleged calls on behalf of TVBI, when they were made, or whether there is any record of what was discussed.
[117] Finally, Mr Chang did not accept that the letter from TVBI's solicitors dated 14 November 2017 constituted evidence of alleged communications between the parties that pre-dated the letter.
The issues
[118]The following issues are to be determined:
(1)Should leave be granted to TVBI to apply for summary judgment?
(2)(If leave is granted) is it reasonably arguable for World TV that Mr Ho did not have authority to bind World TV when he signed the 2016 Agreements?
(3)If the 2016 Agreements are binding on World TV, has TVBI sufficiently proved that World TV has no arguable defence as to the amount claimed?
(4)Should the Court exercise its discretion against the entry of summary judgment?
[119]I will address each of those issues in turn.
Issue (1) – Should leave be granted to TVBI to apply for summary judgment?
[120]I am satisfied that this is a proper case for leave to be granted.
[121] For the reasons set out under Issue (2) below, I consider that TVBI has a strong case on the merits, and the interests of justice require that it be permitted to proceed on a summary basis.
[122] Ms Wroe submitted that at the time the proceeding was filed it was not clear what World TV's position would be in relation to the outstanding fees, and that the prospect of a successful summary judgment application only became apparent after World TV had filed its defence. That defence showed that the principal issue would be Mr Ho's authority to bind World TV, and TVBI concluded that that issue was suitable for determination on a summary judgment application. TVBI also obtained an affidavit from Mr Ho. The application for summary judgment was filed promptly, and within one month after World TV filed its statement of defence (and within three months, including the Christmas holiday period, after the statement of claim was filed).
[123] The objective of the High Court Rules being to secure the just, speedy, and inexpensive determination of any proceeding, I conclude that granting leave is appropriate in this case. I make an order accordingly.
Issue (2) – Is it reasonably arguable for World TV that Mr Ho did not have authority to bind World TV when he signed the 2016 Agreements?
[124] After the hearing, the Court of Appeal gave its decision in Bishop Warden Property Holdings Ltd v Autumn Tree Ltd.10 I granted counsel leave to file written submissions directed to the effect of that case, and both counsel filed submissions. Those submissions are summarised below.
Ms Wroe's submissions
[125] Ms Wroe relied on both implied authority11 and, alternatively, on the doctrine of apparent, or ostensible authority. On the issue of implied authority, she submitted that the necessary authority may be inferred from the appointment of the agent to a particular position, or the usages or custom practised in any applicable market or trade, provided the practices are certain, notorious, and reasonable.12 With particular reference to contracts entered into by a company's chief executive, she referred to Hely-Hutchinson v Brayhead Ltd, where the company was held to be bound by contracts entered into on its behalf by its chairperson, chief executive, and de facto
10 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285.
11 She did not suggest the evidence would support a finding that Mr Ho had express authority.
12 Cunliffe v Teather & Greenwood [1967] 3 All ER 561.
managing director. Express authority did not exist, but on the facts the director possessed implied authority to bind the company.13
[126] Applying those principles to this case, Ms Wroe referred to the fact that Mr Ho was a director, CEO, and chairman of World TV's board until he was removed in July 2017. From the beginning of the parties' relationship, he had authority to purchase broadcasting content on behalf of World TV, and to maintain World TV's relationship with TVBI. He was always the point of contact. Occasionally World TV's assistant accountant would contact TVBI, but that was restricted to confirming payment of outstanding fees.
[127] Ms Wroe submitted that the minutes of World TV board meetings show that Mr Ho was required to obtain consent for matters such as obtaining bank loans, signing contracts with SKY TV, or renewing the office lease. But nowhere in the minutes was there any form of consent to Mr Ho negotiating or signing either the 2012 Agreements or the supplementary agreements made in 2015. Nor do the minutes record the granting of consent for any other matters concerning TVBI. The pattern of conduct shows that Mr Ho was not required to obtain approval of World TV's board before signing agreements on World TV's behalf.
[128] On 26 June 2014, Mr Ho did inform World TV's board that he had reached an agreement with TVBI to reduce the content fees by 15 per cent, but his advice was in the nature of an announcement to the board rather than a discussion with a view to obtaining the board's consent.
[129] From mid-2015 Mr Ho began consulting with the board in relation to moving from the original SKY TV digital platform to TVBI's OTT platform. Multiple emails were exchanged between the directors, and there was a formal proposal to the board meeting of 26 November 2015. The evidence shows that implementation of the proposal would bring about a major change for World TV, and because of that, the proposal was heavily discussed over several months. It was not a unilateral decision made by Mr Ho. At the 26 November 2015 board meeting, the directors approved
13 Hely-Hutchinson v Brayhead Ltd [1968[ 1 QBD 549.
Mr Ho's proposal to move to the OTT platform. It was confirmed that that would be implemented from 18 January 2016.
[130] Ms Wroe submitted that the following conduct after the November 2015 board meeting confirms that Mr Ho had actual (implied) authority to finalise matters with TVBI in terms of implementing the OTT platform arrangements:
(a)In early 2016, World TV began advertising to the public that it would be moving to the OTT platform. Subscribers were informed that they would need to change to OTT boxes from 1 March 2016.
(b)The OTT box platform was launched on 18 January 2016 for subscribers to trial.
(c)Prior to the 2016 Agreements being signed, World TV began receiving OTT boxes from TVBI and distributing them to its subscribers.
(d)World TV made part payment for outstanding fees for the services covered by the 2016 Agreements.
(e)World TV continued to broadcast, transmit, and distribute TVBI's contents, despite the 2012 Agreements and the supplementary agreements made in 2015 expiring on 15 August 2015.
[131] On the alternative basis of apparent authority, Ms Wroe noted that the authority is created by the actions of the principal, who by words or conduct allows another person to appear to the outside world as his or her agent. The principal in such a case cannot afterwards repudiate the apparent authority if to do so would injure other parties.14 Ms Wroe submitted that the required appearance of authority commonly results from the appointing of a person to a job or office. That is because a person appointed to a particular position is thereby clothed with the appearance of authority to do the normal acts which pertain to the position. The appointment itself amounts to a representation to other people that such authority exists.
14 Referring to Pole v Leask (1863) 8 LT 645.
[132] Ms Wroe submitted that apparent authority is almost always general in character. And if the relationship between principal and agent has been altered, that will not alter or withdraw the representation previously made by the agent if the alteration of the relationship has not been communicated to the third party.
[133] Ms Wroe relied on the longstanding commercial relationship between the parties, and the role Mr Ho had taken in that relationship. She submitted that TVBI was entitled to assume that the appearance that Mr Ho had the necessary authority reflected the reality at World TV.
[134] Ms Wroe submitted that TVBI altered its position in reliance on its belief that Mr Ho had the necessary authority: it supplied the OTT boxes, as well as content for World TV to broadcast, transmit and distribute. It did so based on the representation that World TV would pay its fees.
[135] In addition, the public implementation of the OTT platform by World TV shows there was no reason for TVBI to question to Mr Ho's authority to enter into the 2016 Agreements. World TV had represented to it by its conduct that Mr Ho had World TV's authority to enter the transaction. World TV is therefore estopped by its actions from asserting the contrary.
[136] Ms Wroe submitted that World TV's relationship with Mr Ho was altered when Mr Ho was removed as a director, CEO, and Chairman in July 2017. However, that removal was never communicated to TVBI. TVBI continued to believe on reasonable grounds that Mr Ho had authority to negotiate payment proposals. The appearance of such authority remained unaltered to the eyes of TVBI.
[137] In any event, if Mr Ho's removal as a director and CEO on 12 July 2017 had the effect of removing his authority, that would not affect the validity of the 2016 Agreements, which were signed when Mr Ho had full authority. Any lack of authority on his part after 12 July 2017 would simply mean that full payment was due as per the 2016 Agreements.
[138] Ms Wroe also referred to the doctrine of ratification by a principal of an agent's unauthorised act. Ratification may be by express words of the principal, or implied from the principal's conduct (eg where the principal takes advantage of the agent's unauthorised act).15 Any ratification must be with knowledge of all material circumstances, and ratification must relate to the entirety of the unauthorised act and not just part of it.
[139] Ms Wroe submitted that it does not make sense for World TV to accept that it approved the decision to move platforms (SKY digital to TVBI's OTT platform), while at the same time contending that there was no subsisting contract between World TV and TVBI. Nor does it make sense for World TV to contend that it was not aware of any indication that there would be further contracts with TVBI, when World TV was publicly advertising its big change, receiving and distributing OTT boxes, and broadcasting TVBI's material. No reasonable person in the market would have assumed that TVBI was providing its services for nothing.
[140] World TV continued to broadcast TVBI's material after August 2015, and it had ample time in that period to question and investigate why TVBI's material continued to be broadcast, why it was receiving OTT boxes from TVBI, and why the OTT boxes were being distributed to its subscribers. There appears to have been no questioning or investigation of any of those matters, or as to what financial arrangements had been made with TVBI.
[141] Further in support of the ratification claim, Ms Wroe referred to the partial payment made by World TV, referred to in Ms Wu's email, and to the fact that World TV included a liability to TVBI in its financial statements for the year to 31 March 2017.
Mr Keall's submissions
[142] Mr Keall first pointed out that, at the time of the publicity relating to World TV's move to the OTT platform, the 2016 Agreements had not been signed. The
15 Smith v Henniker-Major [2002] 3 Weekly Reports 1848.
publicity was in March 2016, and the 2016 Agreements were not signed until September of that year.
[143] He submitted that the facts that World TV's directors may have had access to copies of the 2016 Agreements (in World TV's accounts department) and knowledge of World TV's long-standing relationship with TVBI and the ongoing broadcasting of TVBI's content, could not impute actual knowledge of specific agreements or their contents to the board of World TV. There is no evidence that they were actually advised of these matters. Mr Ho's evidence of disclosure does not extend beyond the accounts department, as confirmed by the tenor of Ms Wu's affidavit. Further, the only copies of the 2016 Agreements the directors have been able to find were the electronic copies attached to an email addressed to Mr Ho.
[144] Mr Ho's intermittent knowledge of World TV's financial woes, combined with the sheer magnitude of the financial obligations entailed by the 2016 Agreements, means that the 2016 Agreements would have been major transactions, requiring board approval and very probably a special resolution of shareholders under s 129 of the Companies Act 1993 (the Act). In the absence of any board minutes relating to the transactions, there is a strong inference that Mr Ho knew that the board and shareholders of World TV would not have approved the proposed transaction.
[145] Mr Keall acknowledged that Mr Ho had a long-standing responsibility for dealing with TVBI, but submitted that concluding the 2016 Agreements without reverting to the board represented a significant departure from Mr Ho's own past practice, in which he had disclosed to the board contract negotiations with various parties, borrowing arrangements, and the fee reduction negotiations referred to in the minutes of the directors' meeting of 26 June 2014.
[146] Mr Keall then submitted that TVBI knew that Mr Ho was signing agreements that submitted World TV to a level of expenditure it plainly could not pay.16 TVBI directed a demand to Mr Ho in June 2016 that World TV pay $299,840, and in response
16 World TV had been unable to comply with similar commitments under the 2012 Agreements, resulting in TVBI agreeing to reduce those payments by $548,000 in mid-2015. Mr Ho had played a central role in that outcome.
Mr Ho arranged a total payment of a little over $52,000. Also, TVBI has not contested World TV's contention that Mr Ho simply capitulated to TVBI's terms, and agreed to backdate the 2016 Agreements by six months, without negotiation. TVBI must have realised that Mr Ho could not have obtained authority from his board to proceed with those arrangements. At very least, there are genuine concerns over Mr Ho's behaviour which cannot be resolved on an interlocutory application such as this.
[147] Nor is there any evidence from the person who signed the 2016 Agreements on behalf of TVBI. If the 2016 Agreements were preceded by any communications, they have not been disclosed.
[148] Mr Keall referred to the proviso to s 18 of the Act, submitting that World TV will be able to prove at trial that TVBI knew Mr Ho lacked the authority to sign the 2016 Agreements.
[149] On the matter of alleged uncontested irregular conduct, Mr Keall referred to Ms Wu's affidavit, and in particular her evidence of Mr Ho's request that the annual licence fee of $400,000 payable to TVBI be excluded from World TV's accounts (on the basis that they were said to be not payable until there was a profit from that part of the business). TVBI had the opportunity to contest that evidence, but it did not do so. The evidence therefore suggests that Mr Ho negotiated alterations to the 2016 Agreements that reduced, or at least suspended, the full impact of their terms. World TV must be entitled to explore those arrangements via discovery, other interlocutory steps as appropriate, and cross-examination. The need for further exploration of Mr Ho's conduct is reinforced by the fact that he held a lucrative contract with TVBI through one of his own companies (IVL), while he was a director and shareholder of World TV. TVBI has acknowledged the existence of its arrangements with IVL in correspondence between the parties.17
17 In a letter from TVBI's solicitors dated 12 October 2017, responding to Jody Chang's letter of 3 October 2017, TVBI denied that there were any "under the table" deals between it and Mr Ho. The solicitors explained that TVBI had formally engaged the services of IVL for investigation and monitoring services against infringing websites, and other illegal activities. TVBI and IVL had entered into an agreement under which TVBI agreed to pay NZ$825,000 for IVL's services. The solicitors said that no further payments were made as TVBI no longer required IVL's services.
[150] Mr Keall submitted that Mr Ho's claim that, after he was removed as a director and CEO of World TV on 12 July 2017 Gary Chang authorised him to negotiate terms of settlement with TVBI, is extraordinary. The allegation is denied by Mr Chang, who points out that he held no position at World TV at the time that could have entitled him to authorise Mr Ho to do anything on behalf of World TV.
Mr Keall's additional submissions on the Bishop Warden case
[151] The brief facts of the case were as follows. On the morning of 3 August 2017, Xiaoyuan Niu (Tina) was the sole director of Autumn Tree. But around lunchtime that day, papers were filed with the Companies Office appointing an additional director (Lanhua Zhang – "Anna"). Notwithstanding the appointment of Anna as an additional director, in the early evening of 3 August Tina purported to sell a property, being a major asset of Autumn Tree, to Bishop Warden. Mr Blomfield of Bishop Warden met Tina for the first time on the afternoon of 3 August, and the purchase price represented approximately one-third of the value of the property at the time. Settlement was also deferred for one year. Bishop Warden lodged a caveat on the title to the property, and Autumn Tree applied to this Court to have it removed. Autumn Tree contended that the purported agreement was invalid, as Tina did not have authority to enter into it on behalf of Autumn Tree. Hinton J discharged the caveat on the basis that Bishop Warden had no reasonably arguable case for an equitable interest in the property. Her decision was upheld on appeal.
[152]Mr Keall submitted that three relevant propositions can be distilled from
Bishop Warden:
(i)A director cannot be authorised by a company to enter into a major transaction18 in the absence of a special resolution.19
(ii)The customary authority of one director of a board acting alone is very limited. In the absence of some representation made by the company,
18 As defined in s 129 of the Act.
19 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd, above n 10, at [31], [36] and [49].
a director acting alone from other directors has no ostensible authority to bind it,20 and s 18 of the Act will not save the contract.
(iii)Awareness of suspicious circumstances surrounding entry into an agreement, such as an obvious undervalue, is arguably inconsistent with any apparent authority to enter into the agreement.21
[153] In this case, Mr Keall submitted that the 2016 Agreements arguably did constitute a major transaction, and there was no special resolution of World TV's shareholders approving the transaction.
[154] Mr Ho's customary authority as a director did not carry with it any apparent or ostensible authority to act on behalf of World TV, and there is no evidence that World TV made any sort of representation to TVBI about Mr Ho's authority to contract on its behalf. Nor is there any evidence of any authority customarily enjoyed by the CEO of a media company such as World TV (Mr Ho signed the 2016 Agreements as "CEO", not as "executive director", or "chairman", or any other expression that might have conveyed the meaning that he was acting for World TV's board).
[155] TVBI was or ought to have been aware of suspicious circumstances22 surrounding World TV's entry into the 2016 Agreements, and those circumstances were arguably inconsistent with the apparent authority for which TVBI contends.
Ms Wroe's reply submissions on the Bishop Warden case
[156]Ms Wroe summarised her submissions in response as follows:
(i)Section 129 of the Act does not provide an arguable defence as the summary judgment application relies on the CEO's actual implied authority or apparent authority. The Court does not need to explore express authority. In any event there is no evidence to show this was a major transaction. References to parts of World TV's financial
20 At [27].
21 At [42], [70] and [71].
22 Being the circumstances referred to at para [143] of this judgment.
statements are insufficient to show that s 129 of the Act provides an arguable defence.
(ii)The customary authority of one of a number of directors is irrelevant when the Court is concerned with the actions of a CEO who contracted on behalf of World TV as CEO, and not as a director. That is a key difference between Bishop Warden and this case.
(iii)Bishop Warden does not change the law in relation to s 18 of the Act and the proviso concerning constructive knowledge. Subsection 18(1)(c) or (d) applies. Evidence of the customary authority of a CEO of a media company such as World TV was not necessary in circumstances where entering into contracts such as the 2016 Agreements was part of World TV's ordinary course of business.23
(iv)Bishop Warden is readily distinguishable. The buyer in Bishop Warden met the director once, the day the contract was signed, and the sale took place at a significant undervalue. In this case, TVBI's prior relationship with World TV had been successful for many years, and included previous similar contracts. This is not a case where it was arguably unreasonable for TVBI to rely on Mr Ho as having apparent authority to enter into the 2016 Agreements, or where the proviso to s 18(1) of the Act might apply.24
[157] As for the operation of the proviso, World TV's own internal difficulties could not have put TVBI on notice of a potential lack of authority. World TV's difficulties in paying invoices and the renegotiation of terms occurred prior to World TV's move to the new (OTT) platform, and in any event it was not for TVBI to enquire into whether this was a good bargain for World TV.
23 Referring to Levin Meats Ltd v Perfect Packaging Ltd (2011) 10 NZCLC 264 (HC).
24 The proviso to s 18(1) of the Act states that the various protections available to a third party dealing with a company (as set out in s 18(1)) are to apply "unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in [any of the subparagraphs of s 18(1)]."
Discussion and conclusions on Issue (2)
[158] There was little difference between counsel on the law affecting Mr Ho's ability to bind World TV when he signed the 2016 Agreements. Both counsel were content to argue the matter based on New Zealand law, notwithstanding the existence of provisions in the 2016 Agreements which provided that the applicable law would be that of the Hong Kong Special Administrative Region of China. I raised the point with counsel at the hearing, but neither sought leave to file further evidence or submissions based on the law of the Hong Kong SAR. I think TVBI was entitled to rely on the 2016 Agreements themselves, and if World TV wished to contend that the relevant law of the Hong Kong SAR differed in some material respect from the common law of the United Kingdom and New Zealand, it was for World TV to plead and provide evidence of the relevant foreign law. As it did not do that, I approach the matter on the basis that, on the issue of apparent or ostensible authority in particular, there is no material difference between the relevant laws of the two jurisdictions.
[159] The relevant statutory provisions in New Zealand appear to be ss 180 and 18 of the Act. Those sections materially provide as follows:
180 Method of contracting
(1)A contract or other enforceable obligation may be entered into by a company as follows:
…
(c) an obligation which, if entered into by a natural person, is not, by law, required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the company’s express or implied authority.
…
18 Dealings between company and other persons
(1)A company or a guarantor of an obligation of a company may not assert against a person dealing with the company or with a person who has acquired property, rights, or interests from the company that—
(a)this Act or the constitution of the company has not been complied with:
(b)a person named as a director of the company in the most recent notice received by the Registrar under section 159—
(i)is not a director of a company; or
(ii)has not been duly appointed; or
(iii)does not have authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise:
(c)a person held out by the company as a director, employee, or agent of the company—
(i)has not been duly appointed; or
(ii)does not have authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company customarily has authority to exercise:
(d)a person held out by the company as a director, employee, or agent of the company with authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power:
(e)a document issued on behalf of a company by a director, employee, or agent of the company with actual or usual authority to issue the document is not valid or not genuine—
unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a), (b), (c), (d), or (e), as the case may be.
…
[160] The law relating to a company's contracts with third parties was helpfully summarised in the Bishop Warden case.25 The Court of Appeal noted that authority to bind a company to contracts is primarily reserved to the board of directors.26 Whether an agreement entered into by a director is valid depends upon whether the director had actual or apparent authority to enter into the agreement on behalf of the company. The customary authority of one director of a board acting alone (as opposed to a sole director) is very limited, and the position of a director does not carry with it any ostensible authority to act on behalf of the company. Directors can act only
25 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd, above n 10 at [26] to [33].
26 Companies Act 1993, s 128.
collectively as a board, and the function of an individual director is to participate in decisions of the board.27
[161] In Bishop Warden, the Court of Appeal noted that one form of implied authority is the authority the law regards as existing by reference to the position held by the agent vis-à-vis the principal. In the corporate arena, the role performed by the servant or agent in the corporate structure will influence the extent of that person's implied authority. In general terms the more senior the role the greater the person's implied authority is likely to be.28
[162] As for apparent authority, the Court noted that the agent must be held out as having authority to enter into a transaction of the kind made, the holding out must be done by the principal or someone with actual authority, the third party must know of the principal's holding out and rely on it, and the third party's reliance must be reasonable. The onus of proof is on the third party. If there is no actual benefit to a company, it may not be reasonable to rely on any holding out or apparent authority.29
[163] The Court of Appeal in Bishop Warden noted30 that a transaction might be invalid where the transaction was a major transaction requiring a special resolution of shareholders, and no such resolution had been passed.31 However, those dealing with the company in such a case are provided with legislative protection by s 18 of the Act.
[164] In this case, Mr Keall does rely on alleged failure to comply with s 129. He submitted that the 2016 Agreements constituted major transactions for World TV which were not approved by any special resolution. He referred in support to the
27 Bishop Warden, above n 10, at [27] referring to Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 (HCA) at 205.
28 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd, above n 10, at [28], referring to Giltrap City Ltd v Commerce Commission [2004] 1 NZLR 608 (CA) at [40].
29 Bishop Warden, above n 10, at [30].
30 At [31].
31 A "major transaction" of a company is defined by s 129(2) of the Act. Broadly, a major transaction will occur when the company acquires or agrees to acquire assets the value of which is more than half of the value of the company's assets before the acquisition, where the company disposes of, or agrees to dispose of, assets the value of which is more than half of the value of the company's assets before the disposition, or where the transaction would be likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities the value of which would be more than half of the value of the company's assets before the transaction. Under s 129(1), the company must not enter into any such transaction unless the transaction has been approved by special resolution of the company, or is contingent on approval by such a resolution.
financial statements for World TV that Mr Gary Chang produced, and to the fact that the 2016 Agreements would commit World TV to expenditure, over the three year terms of the 2016 Agreements, to expenditure of approximately $2,270,000.
[165] I will deal with the s 129 point briefly. If the 2016 Agreements did constitute major transactions under s 129 (a point I do not need to decide), the situation would be covered by s 18(1)(a) of the Act: a section of the Act would not have been complied with. The effect of s 18 is that World TV could not rely on the breach (at least as against TVBI), unless it could bring itself within the proviso to s 18 by showing that TVBI had, or ought to have had, by virtue of its position with or relationship to World TV, knowledge of the fact that Mr Ho had purported to sign the 2016 Agreements in breach of s 129 of the Act.
[166] I do not think there is a sufficient evidential foundation for this submission. There was no evidence to suggest that TVBI's position with or relationship to World TV should have put it on notice that the 2016 Agreements might be major transactions for World TV, and even less to suggest that, if that was the case, TVBI was or should have been aware that World TV had not passed a special resolution approving the 2016 Agreements.
[167] That view is of course concerned only with the issue of apparent, or ostensible, authority. I think it would clearly be arguable for World TV that Mr Ho could not have had implied authority to enter into a transaction on behalf of World TV that would breach s 129 of the Act.
[168] In her submissions, Ms Wroe emphasised that Mr Ho was not just the chairman of World TV's board, he was, and had been from a time pre-dating the 2012 Agreements, World TV's CEO.
[169] On the authority of a CEO to bind his or her company, Ms Wroe relied primarily on the decision of the UK Court of Appeal in Hely-Hutchinson v Brayhead Ltd, a case in which Mr Richards, the chairman and de facto managing director of Brayhead, was held to have had authority to enter into certain contracts on Brayhead's
behalf.32 At first instance, Roskill J found that Mr Richards was "at all times its chief executive in addition to being chairman."33 The Judge was satisfied that on numerous occasions in the past Mr Richards had entered into contracts on behalf of Brayhead without prior authority from the board. The board allowed him to do this, and acquiesced in his doing it. Roskill J concluded that Mr Richards was clearly allowed by Brayhead to hold himself out as having ostensible or apparent authority to enter into commitments of the kind with which the case was concerned.34
[170] In the Court of Appeal, Lord Denning MR discussed the nature of implied authority and apparent, or ostensible, authority. As to implied authority, the Master of the Rolls said that the authority is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office.
[171] Lord Denning noted that ostensible or apparent authority often coincides with actual authority, but on occasion may exceed the agent's actual authority (as for example where the board has placed limits on the authority of the managing director, but those limits have not been communicated to a third party dealing with the managing director (in a transaction that would normally be regarded as within the scope of a managing director's authority) — in such a case the company will be bound by the managing director's ostensible authority). In such circumstances, the managing director may, himself or herself, do the "holding-out" that is required to establish apparent or ostensible authority.35
[172] Lord Denning considered that Mr Richards' appointment as chairman of Brayhead did not carry with it authority to enter into the relevant contracts without the sanction of the board. But he considered that Mr Richards had authority implied from the conduct of the parties and the circumstances of the case: he was the de facto managing director and chief executive, who made the final decision on any matter concerning finance. And by its conduct over many months the board had acquiesced
32 Hely-Hutchinson v Brayhead Ltd [1968] 1 QBD 549.
33 At 560.
34 At 561-562.
35 At 583.
in Mr Richards acting as their chief executive and committing Brayhead to contracts without the necessity of sanction from the board.36
[173] The other judgments in the Court of Appeal were to similar effect. Lord Wilberforce agreed that Mr Richards could not have had the necessary implied or apparent authority merely by virtue of his position as chairman, but he had implied authority on the facts of the case.
[174] Lord Pearson agreed that Mr Richards had implied authority from the board to bind Brayhead. On the question of ostensible authority, His Lordship noted that the authority does not usually involve any direct communication between the board of a company and the outside contractor — the communication is typically made immediately and directly by the agent to the outside contractor. It is therefore necessary in order to make a case of ostensible authority, to show in some way that such communication, which was made directly by the agent, is made ultimately by the board. His Lordship considered that that could be shown by inference from the conduct of the board in the particular case, by (for instance) placing the agent in a position where he could hold himself out as the company's agent, and acquiescing in his activities, so that it could be said that the board had in effect caused the representation to be made. In those circumstances, the board is considered to be responsible for, and to have made, the representation to the outside contractor.
[175] Ms Wroe also referred to the decision of the New Zealand Court of Appeal in Pascoe Properties Ltd v Attorney-General, a case concerned with the authority of a valuer, who had been retained by the Ministry of Economic Development to negotiate generally on its behalf, to commit the Ministry to the renewal of the term of a lease.37 On the issue of ostensible authority, the Court referred to its judgment in New Zealand Tenancy Bonds Ltd v Mooney, where the Court noted that a representation by the agent that he has authority cannot create apparent authority unless the principal can be regarded as having in some way instigated or permitted it, or put the agent in a position where he appears to be authorised to make it.38
36 At 584.
37 Pascoe Properties Ltd v Attorney-General [2014] NZCA 616 (CA).
38 New Zealand Tenancy Bonds Ltd v Mooney, [1986] 1 NZLR 280 (CA), referred to in Pascoe Properties Ltd v Attorney-General at [19].
[176] The Court in Pascoe concluded that the representation of authority necessary for a finding of apparent authority can be effected through a course of dealing that is sufficiently frequent and understood. It may also arise where an agent is vested with a particular office, and that office is of the kind that could reasonably be expected to carry the authority to enter into the transaction. The perception of authority by the other party must be reasonable.39
[177] Ms Wroe also relied on the judgment of French J in Levin Meats Ltd v Perfect Packaging Ltd.40 In that case, the Judge was concerned with whether the appellant company (Levin) was bound by a contract entered into by its general manager/chief executive officer (Mr Grey) without the approval of Levin's board. The parties accepted that nothing turned on the question of whether Mr Grey's proper designation was "general manager" or "chief executive officer". Mr Grey had assured the respondent (Perfect) that he had full signing authority, but that authority was later denied by Levin's board. Perfect's claim against Mr Grey was settled, and its case proceeded against Levin. Mr Grey gave evidence for Perfect, contending that he had acted within his authority as chief executive officer who controlled Levin's operations. One of Levin's directors gave evidence to the contrary, saying that Mr Grey did not have authority to enter into contracts for the acquisition of the significant capital items of the kind with which the case was concerned, without board approval.
[178] As in this case, there was no evidence as to the powers customarily exercised by a general manager or chief executive officer of a company operating in the relevant industry.
[179] On appeal from the District Court judgment upholding Perfect's claim, French J noted that Mr Grey's actual authority was not in issue — the issue was whether he had apparent authority, as represented by Levin. Her Honour accepted that the existence of other contracts signed by Mr Grey on behalf of Levin involving the purchase of capital items was relevant to the issue of apparent authority, and it was not disputed that Mr Grey had on occasion signed such contracts (being contracts of similar importance to the one in issue). Levin's director accepted that in the other
39 Pascoe Properties Ltd v Attorney-General, above n 37, at [21].
40 Levin Meats Ltd v Perfect Packaging Ltd HC Christchurch CIV-2011-409-000018, 1 August 2011.
cases where Mr Grey had signed, there was no way the other contracting party would have known whether the board had approved the transaction or not.
[180] Her Honour said that she would have been prepared to accept without evidence that a chief executive officer of a company like Levin would normally have authority to enter into contracts for the acquisition of capital items of the value of the contract at issue. She considered it significant that various authorities relied upon by counsel for Levin had related to contracts purportedly entered into by middle management, not a chief executive officer.41
[181] Her Honour then addressed subsections 18(1)(c) and 18(1)(d) of the Act, which together broadly encompass the common law concept of apparent, or ostensible, authority, subject to the "reliance/reasonableness" factors which are addressed (in an arguably narrower fashion) by the proviso to s 18(1). Her Honour noted first that the key difference between s 18(1)(c) and s 18(1)(d) is that subsection (1)(d) involves an agent having apparent authority that would exceed his or her normal customary authority. The learned Judge went on to note that, on the assumption that it would not have been common for a chief executive officer of a meat processing company the size of Levin to enter into contracts of the type in issue, it followed that to satisfy subsection (1)(d) more than just the designation "chief executive officer" was required.42
[182] On the facts, Her Honour was satisfied that there was further evidence, and that s 18(1)(d) of the Act applied. She noted, for example, that Levin's directors did not even know that Mr Grey's business card showed him as the CEO. When outsiders contacted Levin's plant, Mr Grey was the only person available, and he appeared to be in complete control. Her Honour considered it "very significant" that Mr Grey had previously negotiated and signed contracts for the purchase of valuable capital items on behalf of Levin. Her Honour concluded that the combined effects of the further evidence was sufficient to establish that, whatever may have been the normal practice in meat processing companies, Levin held out or represented to the world at large, and in particular Perfect, that Mr Grey did have the authority to enter into a contract of the
41 At [56].
42 At [58]-[59].
type at issue. Section 18(1) and the conditions of ostensible authority at common law were accordingly satisfied.
[183] I think that must also be the case here. As in Levin Meats Ltd v Perfect Packaging Ltd, Mr Ho had previously negotiated and signed contracts of a very similar nature with TVBI, and he had done so with the apparent authority, acceptance, or acquiescence of the board of World TV.43 As Lord Pearson noted in Heli-Hutchinson, the required apparent authority can be inferred from the conduct of the board in a particular case, for example by placing the agent in a position where he could hold himself out as the company's agent, and in acquiescing in his activities. In my view, that is precisely what has happened here. By either approving Mr Ho's execution of the 2012 Agreements as its chief executive officer, or acquiescing in his action in signing the 2012 Agreements, the board in effect caused the later representations made to the effect that Mr Ho had the same authority from World TV to sign the 2016 Agreements as its agent.
[184] That is consistent with the decision of the Court of Appeal in Pascoe, where the Court noted that the representation of authority necessary for a finding of apparent authority can be effected through a course of dealing that is sufficiently frequent and understood.
[185] All of those factors are present here, and in my view the absence of evidence on what a chief executive officer/chairman in Mr Ho's position had customary authority to do on behalf of the company was unnecessary. Even if entering into the 2016 Agreements would not have been within the customary authority of someone in Mr Ho's position, the circumstances fell within s 18(1)(d) of the Act — World TV held out Mr Ho as having authority to sign the 2016 Agreements on its behalf.
[186] The case for World TV on Issue (2) must therefore turn on the operation of the proviso to s 18(1), and whether TVBI's reliance on the holding out of Mr Ho as having the necessary authority was reasonable.
43 World TV could not reasonably suggest that it was unaware of the fact that Mr Ho had signed the 2012 Agreements, or the 2015 supplementary agreements, and I did not understand Mr Keall to have made any argument to that effect.
[187] French J considered the operation of the proviso to s 18(1) in Levin Meats Ltd. It was common ground between counsel in that case that Perfect would not have been entitled to rely on s 18(1)(d) if its representative knew or ought to have known that Mr Grey did not have authority to enter into the contract. It was also common ground that "knowledge" for the purposes of the proviso was wider than actual knowledge, and would include imputed or deemed knowledge, such as wilfully shutting one's eyes to the obvious, wilfully and recklessly failing to make such enquiries as an honest and reasonable person would make, knowing of circumstances which would indicate the facts to an honest and reasonable person, and knowing of circumstances which would put an honest and reasonable person on enquiry.44
[188] Mr Keall submitted that TVBI ought to have known of a number of matters which should have put it on enquiry as to whether Mr Ho had authority to sign the 2016 Agreements. He submitted first that the 2016 Agreements committed World TV to a level of expenditure it plainly could not pay. TVBI had directed a demand to Mr Ho in June of that year for payment of $299,840, and in response Mr Ho arranged a total payment of a little over $52,000. He submitted also that TVBI had not contested World TV's contention that Mr Ho simply capitulated to TVBI's terms, and agreed to backdate the 2016 Agreements by six months, without negotiation. He submitted that TVBI must have realised that Mr Ho could not have obtained authority from his board to proceed with those arrangements. At very least, he argued that there were genuine concerns over Mr Ho's behaviour which could not be resolved on an interlocutory application for summary judgment. He noted also that there was no evidence from anyone who signed the 2016 Agreements on behalf of TVBI, nor evidence of any communications which may have preceded the signing of the 2016 Agreements.
[189] Mr Keall also referred to the "irregular conduct" of Mr Ho, particularly in respect of Ms Wu's evidence that Mr Ho asked to exclude a licence fee of $400,000 payable to TVBI from World TV's accounts (on the basis that they were said to be not payable until there was a profit from that part of the business). Mr Keall submitted that the evidence suggests that Mr Ho must have negotiated alterations to the 2016 Agreements that reduced, or at least suspended, the full impact of their terms. World
44 Levin Meats Ltd v Perfect Packaging Ltd, above n 40, at [62]-[63], citing John Farrar (ed)
Company & Securities Law in New Zealand (Brookers, Wellington, 2008) at 121-122.
TV must be entitled to explore those arrangements via discovery and cross examination.
[190] In my view, World TV has not provided sufficient evidence to show an arguable case that the proviso to s 18(1) applies.
[191] First, I do not consider there is anything in Mr Keall's "backdating of the agreement" argument. While the supplementary agreements made in 2015 expired in mid-August of that year, it is clear from the email from Ms Yu of TVBI dated 6 June 2016 that World TV had assumed ongoing obligations to TVBI on some basis thereafter.45 There appears to have been continuity of supply by TVBI through to the time the 2016 Agreements were signed, with the supply switched to TVBI's OTT platform from 1 March 2016. There must have been some understanding on the price that would be payable from 1 March 2016, and I do not consider it at all surprising that when the parties got round to documenting their understanding in the 2016 Agreements, the terms were backdated to the date the (OTT) supplies commenced.
[192] Turning to Mr Keall's argument that TVBI must have realised that the 2016 Agreements would be uneconomic for World TV, I accept that TVBI must have known that World TV had run into financial difficulties over at least the two years or so leading up to the signing of the 2016 Agreements. More generally, it would have been aware that the activities of consumers engaged in illegal live streaming had adversely affected the market for satellite and cable TV providers.
[193] For example, on 26 June 2014 Mr Ho reported to his board that, due to lower subscriber numbers, he had asked TVBI to reduce its content fees by 15 per cent, and that TVBI agreed. And the impression from the minutes is that at its meeting of 26 November 2015, the World TV board was under no illusions about the financial difficulties in which it found itself. The minutes referred to a "need to retrench", and Mr Ho told the board that he considered operating expenses would need to be reduced by negotiating reductions in content fees "in view of the decline in the company's
45 According to that email, there was an "agreed payment schedule" under which World TV would pay TVBI a total of $575,628 during the period December 2015 to May 2016. The email said that World TV had only paid $275,788, leaving a balance of $299,840.
revenues". But it appears that World TV was by no means a "basket case" — at the meeting of 16 June 2015 the board unanimously agreed to authorise Mr Ho to negotiate a $500,000 loan from the bank to cover certain capital expenditure requirements, and World TV group's consolidated financial statements for the year ended 31 March 2016 did show a small profit.
[194] At the board meeting of 26 November 2015, the board unanimously agreed to approve Mr Ho's proposal to switch to the OTT platform, but some board members, including Mr Gary Chang, expressed serious doubts about moving to the OTT platform with TVBI. Mr Ho is reported to have advised the board that, while the move could not be assured of success, remaining with the SKY TV platform would surely guarantee failure. Mr Ho expressed the view that the OTT platform was the way for the company to retain lost subscribers and build its business for the future.
[195] Against that background, I see nothing in the previous late payments or defaults of World TV, or the costs involved for World TV under the 2016 Agreements, that should have put TVBI on notice that Mr Ho might not have the authority of his board when he entered into the 7 September 2016 Agreements. TVBI would have assumed the World TV board was well aware of both the market difficulties the company had encountered in New Zealand, and its track record of late payments to TVBI. Against those negative considerations, the two companies had a relationship, with four years of history going back to 2012, and World TV was about to change its operations substantially by moving to internet streaming of its TV content, using TVBI's OTT platform. While World TV would be paying a little more than it was paying under the 2015 supplementary agreements, those agreements were concerned with a different product, and they were only in place for a few months. And the fees payable under the 2016 Agreements (total $2,268,000 over three years) would still be less than the $2,460,000 payable under the 2012 Agreements for the same term. World TV would also be receiving marketing support from TVBI, and guaranteed access to more extensive content for a three year period.
[196] In all of those circumstances I do not think it is at all clear that TVBI must have known that the 2016 Agreements would be uneconomic for World TV. But even if TVBI did think that might be the case, that would not provide a basis for it to infer
that Mr Ho did not or might not have his board's authority when he negotiated the 2016 Agreements. The far greater likelihood is that TVBI would have assumed Mr Ho had the necessary authority, and that World TV was attempting to deal with its difficulties by moving to a new, arguably more attractive product. To the extent that TVBI may have had concerns over World TV's ability to perform under the 2016 Agreements it may also have had one eye on its ability to take over World TV's subscriber base if its relationship with World TV broke down.
[197] There is no evidence of that, but it was a suspicion entertained by some on World TV's board at the November 2015 meeting, including Mr Gary Chang.
[198] The point is that none of this provides any evidential foundation for an argument that TVBI had or should have had reason to believe that Mr Ho was not operating with the approval of his board, as he had on previous occasions when he negotiated contracts with TVBI.
[199] Mr Keall's argument that Mr Ho appears to have capitulated to TVBI's terms, and signed the 2016 Agreements without negotiation, may (if it is so) have simply reflected the parties' respective negotiating strengths. The 2016 Agreements appear to be largely standard form documents used by TVBI, and it is simply not plausible that World TV's board members would not have been aware of how much the move to TVBI's OTT platform in early 2016 would be likely to cost it. Everyone knew about the possible upside in moving to the OTT platform,46 and I think it inconceivable that Mr Gary Chang and the others then on the World TV board would not have enquired about the content cost (even if they did believe that providing a platform on which their clients could watch more than 60 Chinese channels with a single subscriber package would result in significantly higher revenues).
[200] World TV expresses some concern over Mr Ho's "irregular" behaviour generally, including his alleged discussion with Ms Wu in early 2017, when Mr Ho told her that there was an annual licensing fee payable to TVBI of $400,000 and an
46 The media kit prepared in early 2016 announced the move away from the SKY TV network to "a more advanced internet-based OTT platform in association with TVB, the biggest TV station in southern part of China".
annual facility of $300,000. Mr Ho is said to have asked Ms Wu to exclude the licensing fee ($400,000) from World TV's accounts, as they would not be payable until there was a profit from that part of the business.
[201] In a reply affidavit on the third party joinder application, Ms Wan produced a copy of a letter dated 14 November 2017 from TVBI's solicitors to World TV's solicitors, in which TVBI's solicitors said that the three signed licence agreements (constituting the 2016 Agreements) clearly set out the payment terms, and that TVBI has never entered into any additional agreements contrary to those agreements. Ms Wan said in this affidavit that between September 2016 and July 2017 TVBI made phone calls to Mr Ho demanding payments, and that during the period there were regular operations meetings via teleconference, in the course of which TVBI made demands for payments. She said that World TV continuously sought extensions to make payments, and because of the longstanding business relationship those extensions were granted.47
[202] I do not consider it reasonably arguable for World TV that there existed some side agreement between TVBI and Mr Ho, under which the licensing fees would not be payable until that part of the business made a profit. First, when TVBI made its demand on World TV for payment on 7 July 2017, Mr Ho was still chief executive and chairman of World TV. TVBI made demand for the amount then said to be owing, including licensing fees. Mr Ho's response was not to deny that the licensing fees were payable because World TV had not yet turned a profit on that part of the business
— he simply replied (on 10 July 2017) that he had received the email, and was working on a payment schedule that he would send as soon as it was finished. On 17 July 2017 Mr Ho asked for more time to make a payment. He said: "I understand the urgency to settle the outstanding amount with your company therefore I have chased them all the time [an apparent reference to World TV's existing banker]." And on 20 July 2017, Mr Ho told TVBI that he was "organising director guarantees", and that when World
47 The requests for extensions, and TVBI's agreement to those extensions, appear to be reflected in Ms Wan's claim schedule, where arrears of $21,000 claimed to be outstanding for transmission fees in respect of the period March to September of 2016 was said to be not due for payment until 14 November 2016. Similarly, the arrears for the October 2016–February 2017 period were not said to be due until 18 May 2017.
TV drew down on the loan it would pay half of the outstanding amount, and the balance on a monthly basis at the rate of $53,000 until paid.
[203] Mr Ho never mentioned any "side agreement", under which the full amounts stated in the 2016 Agreements would not be payable to TVBI, and the behaviour of both TVBI and Mr Ho is in my view inconsistent with the existence of any side deal of the kind Ms Wu's affidavit appeared to suggest.
[204] Nor does it seem plausible that a substantial commercial operator such as TVBI would have agreed to continue supplying World TV, without being paid over 50 per cent of its agreed fees, until some unspecified future point in time when the relevant part of World TV's business might become profitable.
[205] I do accept Mr Keall's broad submission that there appear to have been concerning "irregularities" in Mr Ho's behaviour, not least in continuing to purport to act as relationship manager with TVBI after he had been removed from the board and dismissed as World TV's CEO on 12 July 2017. While Mr Ho says that he continued to negotiate with TVBI with Mr Gary Chang's express authority, I agree with World TV that that seems implausible in circumstances where Mr Ho had just been dismissed from the board (and from his role as CEO), and was then embroiled in litigation with World TV.
[206] But I do not think such irregularities could be sufficient to fix TVBI with the kind of knowledge required by the proviso to s 18(1) of the Act. They are at best offered in support of speculation by World TV that TVBI might have had some knowledge that Mr Ho did not have authority, but I think his continuing to purport to act on World TV's behalf after he was dismissed as CEO tends if anything to support the view that when he signed the 2016 Agreements he probably led TVBI to believe that he had full authority to do so. And it is not enough for World TV to speculate that a defence might emerge if it is given the opportunity to further investigate the matter, at least where the circumstances do not suggest that an injustice might otherwise occur.48 In my view World TV has not put forward a sufficient evidential foundation to justify the refusal of summary judgment on the "no apparent authority" issue.
48 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA), at 394-395.
[207] I therefore conclude that World TV has not shown an arguable case that the circumstances come within the proviso to s 18(1), or that it was not reasonable for TVBI to have relied on World TV's representations as to Mr Ho's authority. The 2016 Agreements were therefore binding on World TV on that basis. Having regard to that finding, I do not need to make any finding on the issues of whether or not Mr Ho had implied authority to bind World TV when he signed the 2016 Agreements, and whether the 2016 Agreements were ratified by World TV.
Issue (3) – If the 2016 Agreements are binding on World TV, has TVBI sufficiently proved that World TV has no arguable defence as to the amount claimed?
Ms Wroe's submissions
[208] Ms Wroe submitted that TVBI's quantum evidence, in which Ms Wan deposed that TVBI's records show that TVBI performed its licensing and OTT obligations, was sufficient. Ms Wan's supplementary evidence verified the statement of claim, and stated that TVBI performed all of its obligations under the 2016 Agreements.
[209] World TV would have been fully aware of what it was providing its subscribers on the OTT platform, and it made partial payment of the fees claimed. It also included the amount of TVBI's claim in its financial statement for the year ended 31 March 2017.
Mr Keall's submissions
[210] Mr Keall noted that TVBI's claim is founded on the assertion that it performed its own obligations under the 2016 Agreements. In its statement of defence, World TV says that it has insufficient knowledge and particulars of that assertion.
[211] Mr Keall submitted that TVBI has not established a prima facie case of supply of the product and services for which it seeks payment. He accepted that TVBI had supplied a product and services to World TV to a degree, but the extent of that supply relative to the contractual terms was uncertain.
Discussion and conclusion on Issue (3)
[212] In my view, TVBI has sufficiently shown that World TV has no arguable defence on this issue.
[213] The carriage fees, customer support fees and marketing fees claimed by TVBI are all in the category where World TV must have known whether it had received the services, and I think that must also be the case with a charge of $13,017 claimed by TVBI as the balance due on a talent fee for the 2015 Miss Chinese New Zealand pageant. World TV should not have been dependent at all on Mr Ho to work out what content it had received over the relevant period, and what it had paid for that content.
[214] That situation appears to be aptly covered by the requirement that, to defeat a summary judgment application, the defendant must provide sufficient particulars to show that there is an issue worthy of trial.49 In my view World TV has not done that, and Ms Wan's evidence that TVBI performed all of its obligations, plus Mr Ho's apparent acceptance of the amounts claimed, were together sufficient to require World TV to supply at least some particulars of any obligations TVBI may not have discharged under the 2016 Agreements.
[215] The same considerations apply to TVBI's claim for "121 program hours @ NZ$80" — total $9,680. World TV must know what program hours it received that it has not paid for at the agreed rate of NZ$80, and it was incumbent on it to put forward at least something to show that there is an issue worthy of trial on this claim. It has not done so.
[216] Likewise, World TV has not suggested it has not received the benefit of the unpaid transmission fees (total $21,000, payable at the rate of $3,000 per month under the 2016 Agreements, plus arrears (total $36,000) unpaid for the period March 2016 to February 2017). If these fees had been paid it was up to World TV to say so.
49 Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at 185.
Issue (4) — should the Court exercise its discretion against the entry of summary judgment?
[217] Particularly with the falling away of the third party claim against Mr Ho following the hearing, when he became bankrupt, I see no basis for exercising my discretion against an award of summary judgment in this case. The discretion is in any event a limited one, at least where the entry of judgment would not involve an injustice, 50 and World TV has not advanced any arguable basis for a finding of possible injustice.
Result
[218] For all of the foregoing reasons, I conclude that TVBI has sufficiently shown that World TV has no reasonably arguable defence to the claim, and that it is liable for the $1,009,897 summarised in the schedule produced by Ms Wan as exhibit "O" to her first affidavit, together with the further sum of $3,000 representing transmission fees for September 2017. There will accordingly be summary judgment for TVBI in the sum of $1,012,897 as claimed.
[219] The 2016 Agreements each provided for interest compounding at 1.5 per cent per month. A table was provided by Ms Wroe at the hearing, setting out the total claim of $295,173.78. The amount in the table appears to have been calculated to the date of the hearing, notwithstanding the termination of the 2016 Agreements in early October 2017. Mr Keall did not take any point about that at the hearing, and it may be that World TV accepts that the interest has been correctly calculated. However, Mr Keall may not have had time to consider the issue and if there is any dispute I would be assisted by further brief submissions from counsel. I accordingly direct that World TV is to file a memorandum within 15 working days advising if the compound interest calculation provided by Ms Wroe is accepted (on the basis of the judgment now entered for the principal sum claimed). If it is not, the memorandum is to state the respects in which the calculation is not accepted, and the grounds for that position. In the event the interest claim is disputed, TVBI may file a reply memorandum within 10 working days of service of World TV's memorandum. I will then deliver a
50 Berg v Anglo-Bank International Ltd, 1 PRNZ 713 (CA), referring to Sayles v Sayles (1986) 1 PRNZ 95 (HC).
supplementary judgment on the papers dealing with application for summary judgment on the interest claim.
[220] TVBI had two other substantive claims. The first, for damages (additional to the $1,012,897 for which I have entered judgment) "to be assessed", has not been proved to the point where it is clear that World TV has no arguable defence. It will need to go forward to trial in the usual way. The second claim was for the sum of
$8,218.50 for pre-litigation costs under a particular provision in the licence agreements which formed part of the 2016 Agreements. This claim was not clearly and separately pleaded in TVBI's statement of claim, and details of it were only presented by Ms Wroe at the hearing. In those circumstances I do not consider it appropriate to enter summary judgment on this part of the claim. Like the claim for (additional) damages to be assessed, it will need to go forward to a trial on quantum if the parties are unable to agree on it.
[221] Finally, TVBI is entitled to costs from the commencement of the proceeding. These are awarded on a 2B basis as requested by TVBI, with disbursements to be fixed by the Registrar.
[222] The Registrar is directed to allocate a case management conference at which directions will be given for the disposal of TVBI's outstanding claims, on the first practicable date after 1 May 2019.
Associate Judge Smith
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