Williams v Cameron HC Nelson CIV 2010-442-222

[2010] NZHC 1795

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2010-442-222

UNDER  District Court Rules 2009

BETWEEN  PETER ANTHONY WILLIAMS Plaintiff

ANDTREVOR NELSON CAMERON AND ROBIN WHALLEY

Defendants

Hearing:         19 August 2010

Appearances: Mr Williams appears in person

Mr Darroch for the defendants

Judgment:      22 September 2010         at 3.30 pm

JUDGMENT OF MALLON J

Contents

Introduction............................................................................................................... [1] The pleadings ............................................................................................................ [2] The alleged settlement .............................................................................................. [4] The competing positions ......................................................................................... [11] District Court decision ............................................................................................ [13] My assessment ........................................................................................................ [14] Other matters........................................................................................................... [28] Result ...................................................................................................................... [30]

WILLIAMS V CAMERON AND ANOR HC NEL CIV-2010-442-222  22 September 2010

Introduction

[1]      Mr Williams (the plaintiff) has brought a damages claim against his former accountants (the defendants) arising out of the sale of his business.  The claim was struck out by the District Court as an abuse of process on the basis that the claim was the subject of a settlement agreement.  Mr Williams has appealed that decision.

The pleadings

[2]      The alleged facts giving rise to the claim are as follows:

a)       Mr Whalley and Mr Cameron were partners in the firm of Richards Woodhouse, and Mr Whalley had acted as Mr Williams’ accountant for many years.

b)Mr Williams owned a business, Turbochargers NZ Ltd, part of which was a marine division operating under the name NZ Marine Turbochargers Ltd.

c)       On several  occasions  in  2004  Mr  Williams  was  approached  by a Mr Baerselman  about  selling  the  business  to  him  and  on  each occasion Mr Williams said that he was not interested in selling the business.

d)In  July  2004  Mr  Whalley  approached  Mr  Williams  advising  that Mr Whalley had an acquaintance who was serious about buying the business  and  who  had  sufficient  equity  to  make  a  serious  offer. Mr Williams said that he would only consider an offer for “the top EBIT values”.

e)       On 6 August 2004 a meeting took place at Mr Whalley’s office at which Mr Whalley, Mr Williams, Mr Baerselman and Mr Cameron were  present.     Mr  Whalley  explained  that  he  acted  for  both

Mr Baerselman and Mr Whalley and could not represent both parties in the sale process.  Mr Whalley proposed that Mr Cameron would act for Mr Williams and that Mr Woodhouse, who was also a partner in Richards Woodhouse, would undertake an independent valuation of the business. This arrangement was agreed to.

f)        On  10  August  2004  Mr  Baerselman  indicated  he  only  wished  to purchase the marine division of the business.

g)       On   18   August   2004   Mr   Whalley   advised   Mr   Williams   that Mr Woodhouse had completed his valuation and arranged a meeting for the next day between Mr Whalley, Mr Cameron, Mr Williams and Mr Baerselman.

h)On 19 August 2004, when Mr Williams arrived for the meeting, he was  told  that  Mr  Cameron  was  not  available.    Mr  Williams  and Mr Baerselman were present.   Mr Williams was shown a copy of Mr Woodhouse’s  valuation.    The  valuation  provided  a  range  of valuations  for  the  marine  division  with  a  top  value  of  $800,000. Mr Williams agreed to sell the marine division for this price.

i)On 23 August 2004 Mr Williams received a purchase offer at this price and the sale was completed on 29 October 2004, at which time Mr Williams was informed by Mr Baerselman that the purchase was financed by a business owned by Richards Woodhouse.

j)In 2006 Mr Baerselman and Mr Williams were in dispute over an aspect of the sale and purchase agreement, in the course of which Mr Williams’ barrister inspected the files at Richards Woodhouse and discovered a valuation for the business for $957,000, dated 19 August

2004, apparently prepared by Mr Cameron.

k)Subsequent correspondence from Richards Woodhouse claimed there was no second valuation leading to Mr Williams making a complaint to the NZ Institute of Chartered Accountants (NZICA).

l)In October 2007 the Professional Conduct Committee (the PCC) of the NZICA dismissed the complaint on the basis of evidence from Mr Cameron and Mr Whalley that Mr Cameron’s valuation was an internal one page work paper that Mr Cameron had discussed with Mr Williams.

m)Mr Williams had not been heard in this investigation and, with the assistance of a barrister, he succeeded in having the matter re-opened for  investigation  by the  PCC.    In  May 2009  PCC  held  a  further hearing into the complaint against Mr Cameron (Mr Whalley having earlier   resigned   as   an   accountant   and   partner   of   Richards Woodhouse).   This time the PCC found there was a case to answer and a disciplinary hearing was scheduled for November 2009.  At the disciplinary  hearing  Mr Cameron  pleaded  guilty  to  an  amended charge (which particularised breaches of the Code of Ethics in relation to Mr Williams).  Mr Cameron was censured and ordered to pay costs in respect of the PCC’s investigation and the disciplinary hearing.

[3]      Mr Williams claims that Mr Whalley and Mr Cameron breached a fiduciary duty owed to him.   He claims the difference between the alleged higher Cameron valuation and the sale price as well as his costs in pursuing the matter with the NZICA.

The alleged settlement

[4]      On   28   February   2007   Richards   Woodhouse   issued   an   invoice   to

Turbochargers NZ Ltd for $8597.06 in relation to the preparation of accounts for the

31 March  2006  year.    In  mid 2007 Mr Williams sent Richards Woodhouse an invoice backdated to 4 November 2004 for $226,534.83 described as being:

Invoice for vendors losses incurred in the sale of business NZ Marine Turbochargers when R. Whalley passed to the vendor a purchasers valuation claiming this was an independent valuation while knowing that T. Cameron in acting for vendor had prepared a vendors valuation that he withheld from the vendor.

[5]      Following some correspondence on the invoices, and at a time when the PCC had dismissed Mr Williams’ complaint, a meeting took place on 19 December 2007. Present   were   Mr   Williams   and   Mr   French   (a   new   accountant   acting   for Mr Williams), Mr Cameron, Ms Mills (an accounting clerk at Richards Woodhouse) and a Mr  Barton (Mr  Cameron’s solicitor).   According to an affidavit filed by Mr Cameron, Mr French asked if Richards Woodhouse would be prepared to “write off” their invoice if Mr Williams “dropped his claim”, Mr Cameron said that he would be agreeable to this, but Mr Williams was not agreeable.

[6]      After  that  there  was  a  discussion  between Mr  French  and  Mr Williams. Mr Williams’ affidavit evidence is that the day after the meeting he told Mr French that he “would agree to accept the settlement offer on the basis that Richards Woodhouse credit their invoice for $7500 and in return we would withdraw our claim for $226,534.83.”

[7]      There  was  then  a  telephone  call  from  Mr  French  to  Mr  Cameron. Mr French’s affidavit does not say anything about this telephone call.  Mr Williams says that this is because Mr French had already told him that he could not recall what was discussed.  Mr Cameron says, in his affidavit, that the telephone call took place later on the same day as the meeting.  He says that Mr French told him that he had convinced Mr Williams to back down and to “accept our proposal to write off invoice  55022  on  the  basis  that  Mr  Williams  would  not  pursue  his  claim”. Mr Cameron says that he requested that Mr French send him an email confirming this.

[8]      On 20 December 2007 Mr French emailed Mr Cameron saying:

Hi Trevor

Further to our meeting of yesterday and subsequent phone call I confirm that after conversation with Peter I was instructed to contact you and accept that

on the bases [sic] of you crediting the accounting bill he will withdraw his invoice and take no further action.

I am pleased that all outstanding matters are ended. Thank you for your assistance.

I would appreciate any annual accounting records that will assist me with 07 financials and the minute book.

Robin French

[9]      No response was received by Mr French or Mr Williams and so on 8 January

2008, at Mr Williams’ request, Mr French forwarded the same email to Mr Cameron. No additional message or comment was made by Mr French in forwarding the email. Again no response was received.

[10]     Mr Cameron’s affidavit evidence is that after receiving this email Richards Woodhouse “withdrew” their invoice.   He says that it was normal practice for Richards Woodhouse to send a client a monthly statement of account if a balance was owed.   He says that this occurred with the invoice sent to Mr Williams until Richards Woodhouse withdrew the invoice having received the above email.   He says that he did not believe it was necessary to issue a credit note and that it was not normal practice to send a credit note unless the client requested it.

The competing positions

[11]     The  defendants  brought  their  strike  out  application  on  the  basis  that Mr Williams’ claim had been settled by an  agreement reached in the  telephone conversation between Mr French and Mr Cameron.   The defendants say that the

20 December 2007 email confirmed an agreement that had already been reached. They  say  that  Mr Cameron’s  evidence  about  the  telephone  call  has  not  been challenged.  They say that the wording of the email is consistent with that evidence. They say that there was no need for Mr Cameron to communicate his acceptance. They say that, consistent with an agreement having been reached, no further monthly statements were sent to Mr Williams.

[12]     Mr Williams says that the email was an offer that required acceptance rather than  the  acceptance  of  an  offer  or  written  confirmation  of  an  oral  agreement. Mr Williams says that the offer made at the meeting on 19 December 2007 had been rejected and so was no longer capable of being accepted.  He says that an offer was made in the telephone conversation and that offer was confirmed by the email.  He says that for there to be an agreement Mr Cameron needed to communicate his acceptance of the offer that Mr French had made on his behalf.  He says that this could have been done by Mr Cameron replying to the email confirming his acceptance or by the issuing of a credit note.  As neither of these occurred he says that the offer was not accepted and no agreement was reached.

District Court decision

[13]     The District Court Judge considered that a settlement agreement had been reached and because of that he struck out Mr Williams’ claim.  His reasons were as follows:

[48]      The evidence of the defendant Cameron as to the events leading up to Mr French’s email of 20 December 2007 are unchallenged by Mr French. Accordingly, I must accept the defendant Cameron’s account as to events which culminated in the sending of Mr French’s 20 December 2007 email. Furthermore, on the ordinary and natural meaning of the email of 20 March

2007, it is clear that Mr French has accepted the settlement proposal put forward by the defendant Cameron on the basis that Richards Woodhouse

credit the account of the plaintiff’s business, and on that basis the plaintiff’s

business would discontinue action on its invoice.

[49]      This is not a situation where Mr French was making an offer on behalf of the plaintiff, rather it is a situation where he was accepting a settlement proposal and he confirmed that by concluding “I am pleased that all outstanding matters are ended”.  If that had not been the case, I would have expected Mr French to have taken issue with Mr Cameron’s affidavit and confronted the suggestion that there was a binding settlement.  However, rather than confront the allegation he is silent on that point.

[50]     In my view, the evidence establishes that the settlement agreement was clearly concluded and is binding and that it related to the defendant Whalley as  well  as  the  defendant  Cameron.    If  these  proceedings  were allowed to remain extant, it would constitute a relitigation of the same issues which have been concluded by agreement as between Richards Woodhouse and the plaintiff’s business.

My assessment

[14]     I agree with Mr Williams that because he rejected the offer at the meeting, it was necessary for a fresh offer to be made and for that offer to be accepted in order for there to have been a settlement reached.  There are two possibilities: an offer was made in the telephone conversation which was accepted by Mr Cameron in the telephone conversation; or an offer was made in the telephone conversation, that offer was confirmed in the email and it was necessary for Mr Cameron to communicate his acceptance of the offer after receiving the email.

[15]     In considering these possibilities it must be remembered that strike out should be ordered only in clear cases.  Generally affidavit evidence is admissible in support of a strike out application where it is not disputed.  Where a strike out application is sought on the basis of evidence that is in dispute then it is more difficult to succeed. That is because on a strike out application there is no proper opportunity to test the evidence.  Discovery may not have been carried out, other lines of inquiry may not have been completed and the evidence that is given has not been tested in cross- examination.

[16]     In the present case the defendants say that Mr Williams cannot succeed on the pleaded cause of action because that cause of action was the subject of a settlement agreement.   I would have thought that the defendants ought to have pleaded that and then sought summary judgment on the basis of that pleading supported by affidavit evidence.   However the correct procedure is probably less important  than  remembering  that  it  is  the  defendants  who  bear  the  onus  and Mr Williams should be permitted to proceed with his claim unless it is clear that he could not succeed if the matter went to trial.

[17]     I start first with the evidence which is not in dispute.  It is not in dispute that the offer made at the meeting was rejected by Mr Williams; that after the meeting Mr Williams  decided  that  he  would  be  prepared  to  settle  the  matter;  that  he instructed Mr French to convey that to Mr Cameron; that Mr French did so by telephone;  that  Mr  French  then  sent  the  email,  in  the  terms  set  out  above,  on

20 February 2007 and resent it on 8 January 2008; and that after the 8 January 2008

email  Richards  Woodhouse  ceased  sending  monthly statements  for  their  unpaid invoice.

[18]     Turning to the email, it confirms that Mr Williams instructed Mr French to contact Mr Cameron to “accept that on the [basis] of you crediting the accounting bill he will withdraw his invoice and take no further action”.  The email is expressed as a confirmation of something that had gone before and reference is made to the meeting and the telephone conversation.  In the context of the undisputed evidence this must have been the telephone conversation because at the meeting Mr Williams had not agreed to the settlement that had been proposed.

[19]     The email is expressed as “accept[ing]” something.  That could mean that an offer was made by Mr Cameron in the telephone call and accepted by Mr Williams in that call (with the email then documenting what had already been agreed to) or it could mean that Mr Williams would accept something if Mr Cameron agreed to it (in which case the email would be the offer and would still require Mr Cameron to accept it).

[20]     The next words in the email are “I am pleased that all outstanding matters are ended”.   That points towards the former alternative (ie that the email records an agreement that has been reached) but I consider it is not determinative.   That is because Mr French may have been proceeding on the basis that Mr Cameron would accept what was set out in the email and that therefore outstanding matters would be at end.   The critical words are: “accept that on the [basis] of you crediting the accounting bill he will withdraw his invoice and take no further action”; because those are the words that relate to the agreement (reached or as proposed).  Looking at those words, in their context, I consider that either of the two possible interpretations is open and that evidence of what occurred before and afterwards may be important.

[21]     Mr Williams says that at the meeting on 19 February 2007 he was angry with Mr Cameron and this had been his first opportunity to confront him directly about the actions of Richards Woodhouse in the sale.   He says that the discussion was around “withdrawing” the invoices and this would never have been acceptable to him even had he not been angry with Mr Cameron.   Afterwards, when he had

“cooled down”, he instructed Mr French that he would be prepared to withdraw his invoice if Richards Woodhouse issued a credit note for the invoice they had sent.

[22]     He says that it was important to him that he receive a credit note because a legitimate invoice had been sent to his company.   His company would need to account for the GST on the invoice unless it could show that the consideration for the supply was not as shown on the invoice. He says that the supplier (Richards Woodhouse) was required by s 25 of the Goods and Services Tax Act 1985 to issue the credit note he would need.  He says that it was not necessary that he issue a credit note for his invoice because it was plain on the face of it that it was not a legitimate invoice and that it was intended as provocative notice that there was a claim against Richards Woodhouse in respect of the sale.   For the purposes of a strike out application I consider it appropriate to accept that Mr Williams’ account of his instructions to Mr French might be able to be established at trial.

[23]     It is unclear what words Mr French used to convey Mr Williams’ offer to Mr Cameron.  The District Court Judge found in favour of the defendants partly on the basis that Mr Cameron’s evidence about this conversation was uncontested.  On a strike out application I would not be prepared to find in favour of the defendants on the basis of Mr Cameron’s evidence alone.   It is correct that Mr Williams had the opportunity to put forward contrary evidence via Mr French and had not done so. That, however, does not mean that Mr Cameron’s account must be accepted.  If the offer was made in accordance with what Mr Williams says his instructions were then Mr Cameron’s evidence is not accurate on this point.  Mr Williams has not had the opportunity  to  test,  through  cross-examination,  Mr Cameron’s  account  of  the telephone conversation.   According to Mr Williams, Mr French did not recall the conversation but this too has not been tested through questions put to him in the witness box and in light of the email he sent.

[24]     The email does not necessarily support Mr Cameron’s evidence that it was agreed that Richards Woodhouse would “write off” their invoice and Mr Williams would not pursue his claim.  The email refers to Richards Woodhouse “crediting the accounting  bill”  rather  than  writing  it  off.     It  is  possible,  on  the  basis  of Mr Williams’ evidence and the words used in the email, that Mr French said that

Mr Williams  would  withdraw  his  invoice  and  would  take  no  further  action  if Richards Woodhouse gave a credit for their bill.  Mr Cameron may have understood that he was to write off their invoice, but the offer as communicated to him may have required him to issue a credit note in order for the offer to be accepted.  Richards Woodhouse’s practice not to issue credit notes unless requested to do so by a client would not override a term of an offer from Mr Williams (if there was such a term) that settlement required a credit note.

[25]     Events afterwards are not determinative either.  Mr French was instructed to resend the email, but that may have been because Mr Williams was expecting a response (an email confirming acceptance of the offer or the receipt of a credit note) or because Mr Williams had received a monthly statement in late December/early January and thought that he should not have (either because he was waiting to hear from Mr Cameron that the offer was accepted or because he thought that the offer had already been accepted and that therefore he should not be receiving a statement).

[26]     The cessation of monthly statements might also suggest that the offer had been accepted.  However if the terms of the offer required that a credit note be issued then this was not conduct of the kind necessary in order for the offer to be accepted. For his part Mr Williams had moved on to seeking to have the NZICA reopen its investigation.  That conduct is not consistent with all outstanding matters between Mr Williams and the defendants being at an end.

[27]     At this stage, on the present evidence, there is a prospect that the defendants will be able to prove that Mr Williams’ claim against them cannot succeed because it has been settled.  But, on the present evidence, the defendants have not persuaded me that Mr Williams could not possibly succeed in his claim because of the communications  on  19  and  20  December  2007.     I  therefore  consider  that Mr Williams’ claim should not be struck out on this basis.

Other matters

[28]     The District Court Judge mentioned two other difficulties with Mr Williams’

claim.    One  difficulty  mentioned  was  that  the  claim  has  been  brought  by  Mr

Williams when it was his company that was the party to the sale and purchase agreement.  Counsel for the defendants advises that, although this was referred to as a ground in the strike out application, it was not advanced at the hearing as the basis on which strike out should be ordered.  It may be that Mr Williams can establish that a fiduciary duty was owed to him and, in any event, the claim could be amended to add NZ Marine Turbochargers Limited as a plaintiff (the sale was an asset sale and Mr Williams advises that the company is still in existence).

[29]     The other difficulty mentioned was that the Judge  considered the proper forum for raising the claim for costs and expenses in connection with the disciplinary process was the NZICA disciplinary tribunal.  This raises the issue of causation and remoteness in a claim for breach of fiduciary duty.   The costs arose out of Mr Williams’ concern that the PCC had not followed a proper process in dismissing his original complaint.  That does not, however, mean that a sufficient link is not present between the alleged fiduciary duty breach and the costs Mr Williams incurred in pursuing  this  through  the  disciplinary  process.     I  have  only  heard  limited submissions on this topic and no authorities have been referred to me.  On the basis of those limited submissions I am not persuaded that the claim for costs cannot be claimed in this kind of case.

Result

[30]     The appeal succeeds.  The District Court order striking out the claim is set aside. As Mr Williams is representing himself there is no issue as to costs.

Mallon J

Solicitors:

A Darroch, Duncan Cotterill, Wellington, [email protected]