White v Brkic - [2019] NZCA 514

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA389/2018
[2019] NZCA 514

BETWEEN	CAROLINE RUTH WHITE AND CRUMMER TRUSTEES NO. 82 LIMITED AS TRUSTEES OF THE GRAFTON ROAD TRUST Appellants
AND	GORDAN BRKIC, EMILIJA BRKIC AND NAGI FALTAUS AS TRUSTEES OF THE MADEG TRUST Respondents

Hearing:	8 April 2019
Court:	Clifford, Katz and Thomas JJ
Counsel:	L Herzog for Appellants P L Rice for Respondents
Judgment:	24 October 2019 at 12 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Clifford J)

Introduction

The appellant, Caroline Ruth White, has for some time been a trustee of the Grafton Road Trust (Grafton). On 11 November 2011 Grafton settled the purchase of a commercial unit, 3B1, in a unit title development at 160 Grafton Road, Auckland from the Madeg Trust (Madeg), the family trust of Gordan and Emilija Brkic. Together with Mr Nagi Faltaus, their solicitor, the Brkics are the trustees of Madeg and the respondents in this appeal.
The agreed purchase price for 3B1 was $469,820. On settlement Grafton paid $360,000. The balance, provided as vendor finance, was repayable on 10 May 2012. Grafton failed to repay that finance as and when required. Madeg subsequently issued proceedings against Ms White and her fellow trustees. Ms White defended the proceedings, arguing the vendor finance was unenforceable because of fraud. Madeg was, when it sold 3B1, on notice that the redevelopment of 3B1 had breached various regulatory requirements.[1] Ms White claimed Madeg had not disclosed those breaches to her. The fraud Ms White alleged was that, after she had signed the sale and purchase agreement and without her consent, cl 6 — containing the vendor’s warranties and undertakings — had been crossed out by Mr Faltaus at the time Madeg’s trustees signed the agreement. The cl 6 vendor warranties would have protected Ms White from the losses she incurred consequential on those “non‑disclosed” regulatory breaches. Ms White said she would not have signed the agreement if, when she did, cl 6 had been crossed out.
[1]See [6] below.
In the High Court, Moore J upheld Madeg’s claim for repayment of its vendor finance by Ms White.[2] The Judge was satisfied that Mr Faltaus had not crossed out cl 6 as alleged. Ms White now appeals. She says the Judge’s findings were inconsistent with the evidence.

Background

[2]Brkic v White [2018] NZHC 1458.

Madeg acquired 3B1 from Citiland Ltd in December 2007. For some time previously a Mr Stephen Kelly, through various companies associated with him — including Progression Development Ltd, Great Western Land Ltd and Citiland — had owned all or a large number of the units constituting 160 Grafton Road. Madeg intended to lease 3B1 to Mr Brkic’s recently established engineering business, DHC Consulting Ltd. As matters transpired DHC never moved into 3B1. At all…

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 White v Brkic

Details

AGLC: White v Brkic [2019] NZCA 514
Case: [2019] NZCA 514
Decision Date: 24 October 2019 at 12 pm

CaseChat Overview and Summary

Caroline Ruth White, a trustee of the Grafton Road Trust, purchased a commercial unit at 160 Grafton Road, Auckland, from the Madeg Trust, which was managed by Gordan and Emilija Brkic. The sale was completed on 11 November 2011, with Grafton paying $360,000 and the balance provided as vendor finance, repayable by 10 May 2012. Grafton failed to repay the finance, prompting Madeg to issue proceedings against White. White defended the claim, alleging that the vendor finance was unenforceable due to fraud. She claimed that the vendor warranties, which would have protected her from losses resulting from undisclosed regulatory breaches, were crossed out by the solicitor representing Madeg, Nagi Faltaus, after she signed the sale and purchase agreement. The High Court found in favour of Madeg, and White appealed.

The central legal issue in the appeal was whether the trial Judge's findings were inconsistent with the evidence, particularly regarding the alleged fraud committed by Faltaus in crossing out the vendor warranties. White argued that the Judge's conclusions were incorrect and that the evidence supported her claim of fraud. The Court of Appeal needed to determine whether the Judge's findings were supported by the evidence and whether there were any errors in the Judge's reasoning.

The Court of Appeal found that the Judge's conclusions were consistent with the evidence and that White had failed to establish the fraud she alleged. The Court found that the long-standing involvement of White and her associates in the redevelopment of 160 Grafton Road made it unlikely that Madeg would have provided vendor warranties. Additionally, the absence of evidence from key witnesses, such as the principal of Richard Allen Law, supported the Judge's findings. The Court also noted the commercial context of the sale, where there was no reason for Madeg to provide vendor warranties given the problems besetting the redevelopment. The existence of an undated copy of the agreement for sale and purchase, signed by Grafton's trustees but not Madeg's trustees, further supported the Judge's findings. The Court of Appeal dismissed the appeal and ordered White to pay the respondents' costs for the appeal.

Orders