Wallace v Altan - [2018] NZHC 1337

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2701

[2018] NZHC 1337

BETWEEN
DEBORAH WALLACE

Appellant

AND

HAKAN ALTAN

Respondent

Hearing: 1 May 2018

Counsel:

IM Hutcheson for Appellant P J Wright for Respondent

Judgment:

12 June 2018

JUDGMENT OF WHATA J

This judgment was delivered by me on 12 June 2018 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Counsel/Solicitors:
Iain Hutcheson, Barrister, Auckland Ogles Podwin & Associates, Auckland
Peter Hilton Lowndes, Barrister, Auckland

WALLACE v ALTAN [2018] NZHC 1337 [12 June 2018]

[1] Mr Altan and Ms Wallace were partners in a hair salon. In 2013, Ms Wallace gave notice of dissolution of partnership and issued a trespass notice to Mr Altan. With Mr Altan gone, she continued to operate the salon under a different name but out of the same premises with the same staff. Mr Altan and Ms Wallace were not able to agree the division of partnership property. The District Court made an order for
$39,233 in Mr Altan’s favour, together with interest from 25 January 2017.1 This included a sum for goodwill. However, no order was made in relation to any profits accrued through use of partnership assets after dissolution.

[2] Ms Wallace now appeals on the basis that, in the absence of a restraint of trade, the goodwill value was nil, with the result that Mr Altan owed her $18,773. Mr Altan cross-appeals claiming the Judge erred in failing to make Ms Wallace account for use of partnership assets since dissolution.2

[3]The issues on appeal are therefore:

(a)whether, in the absence of a restraint of trade, the value of the goodwill in a hairdressing business was nil; and

(b)whether Ms Wallace must account for salon profits after the date of dissolution.

Background

[4] The salient facts can be stated briefly. Ms Wallace and Mr Altan are hairdressers. In July 2007, they formed a partnership to operate Saints Hair Design, Ms Wallace’s then hair dressing salon at St Heliers. Mr Altan paid $35,000 for 50 per cent of the business. It was a term of the agreement that if either party wishes to sell their ownership share, the other partner must have the option to purchase at market value.

1 Altan v Wallace [2017] NZDC 18073 at [148].
2 Leave to appeal was necessary as the cross-appeal was filed late. There being no objection to this, leave is granted.

[5] In October 2009, Mr Altan discovered that taxes had not been paid and so he began to take a closer interest in the management of the salon. He then discovered, in early 2011, that Ms Wallace had, between 2007 and 2009, taken in the order of
$210,000 in salon money for personal expenses. Attempts to resolve repayment of the sum taken proved difficult because, among other things, Ms Wallace’s husband was gravely ill at the time.

[6] In September 2011, Mr Altan made an offer to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Wallace v Altan

Details

AGLC: Wallace v Altan [2018] NZHC 1337
Case: [2018] NZHC 1337
Decision Date: 12 June 2018

CaseChat Overview and Summary

In the case of Wallace v Altan, the High Court of New Zealand was tasked with determining the value of the goodwill in a dissolved hairdressing salon partnership and whether the appellant, Deborah Wallace, should account for profits earned after the dissolution. The respondents, Hakan Altan, had been a partner in the salon with Wallace and claimed that, without a restraint of trade, the value of the goodwill was nil. The District Court had previously awarded Altan $39,233, including a sum for goodwill, but no order was made regarding profits accrued after dissolution. The main issues on appeal were whether the value of the goodwill in a hairdressing business was nil in the absence of a restraint of trade and whether Wallace must account for salon profits after dissolution.

The court found that the absence of a restraint of trade did not necessarily mean the value of the goodwill was nil. The value of goodwill would depend on the level of non-transportable return business, which was substantial in this case. The court found that the salon continued to perform as it had done previously, achieving comparable revenue and net profit without Altan. Altan was only able to attract 10% of his clients to a different location. The court concluded that the salon enjoyed a substantial amount of non-transportable return business. The appeal was dismissed, and the cross-appeal was not pursued.

In conclusion, the court found that the value of goodwill in a hairdressing business was not necessarily nil in the absence of a restraint of trade. The court upheld the District Court's decision to award Altan $39,233, including a sum for goodwill. The court also found that it was not necessary to address the issue of accounting for profits earned after dissolution, as the cross-appeal was not pursued. Altan was awarded costs on a scale 2B basis, together with disbursements, unless good reason otherwise can be shown.

Orders