Blight v Colville

• Jurisdiction: New Zealand
• Court: Court of Appeal
• Judge: Cooke J
• Judgment Date: 23 May 2025
• Neutral Citation: [2025] NZCA 188
• Docket Number: CA624/2023

Between

Peter Jonathon Blight

Appellant

and

Mathew Robert Colville

First Respondent

Adam Keith Colville

Second Respondent

[2025] NZCA 188

Court:

Cooke, Hinton and Woolford JJ

CA624/2023

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Contract — appeal against liability finding — restraint of trade — inducement to breach — damages

The issue was whether B had induced a breach of A's restraint of trade clause.

The Court held A's breach was induced by B. A would not have engaged in conduct that involved competition in breach of his restraint without having B to conceal his breach. Limiting A's involvement in the property development company did not avoid a breach of restraint as the activities of the new operation and the property development company were inherently interlinked. It was clear from the evidence that B knew the restraint being breached. Loss was proved.

The proper measure of damages for inducing a breach of restraint required an assessment of loss actually occasioned to plaintiff, measured by a reduction in revenues from increased competition occasioned from the breach of restraint. It was not necessary for a plaintiff to prove loss on a contract-by-contract basis. Loss could be proved, on the balance of probabilities, by a broader analysis. There was evidence that the new company had a significant share of new house building market in area. The measure of damages in HC was incorrect. While the measure of loss for A's was breach contractual and B's tortious, different approaches should lead to same award in this kind of case. Assessing damages based on the value of restraint in original sale and purchase agreement was wrong. Damages should have been based on the loss caused by the illegitimate competition. While the wrong test was applied, B needed to show the award was excessive. Evidence demonstrated a modest award was reasonable. The HC had also concluded that A and B were not jointly and severally liable and had divided the amount of damages award in half so that B was liable for only half of damage. Although there was no cross-appeal on that point, that approach was wrong in principle. The consequence was that B had only been held liable for NZ $126,000. The reduction in the amount awarded increased the certainty that B had failed to show on appeal that the award of damages was excessive.

Counsel:

A D Marsh for Appellant

A R B Barker KC and H P Short for First Respondent

The appeal was dismissed.

• A The appeal is dismissed.

• B The appellant must pay the first respondent costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Cooke J)

Table of Contents

	Para No
Background	[2]
First issue: was Adam's breach induced by Peter?	[22]
Second issue: did Peter intentionally induce the breach?	[26]
Assessment	[29]
Third issue: was loss proved?	[36]
Assessment	[39]
Fourth issue: measure of damages	[43]
Assessment	[47]
Result	[58]

1 The appellant appeals from a judgment finding him liable to the first respondent for $126,000 and interest for inducing a breach of restraint of trade obligations given in favour of the first respondent by the second respondent. 1 The appellant challenges four findings of the High Court, namely:

• (a) that he induced the second respondent to breach the restraint of trade;

• (b) that he intended his actions to induce the second respondent to so breach the restraint;

• (c) that the first respondent suffered loss as a consequence; and

• (d) the quantification of that loss.

Background

2 The primary factual findings of the High Court Judge are not in dispute.

3 The first respondent (Mathew) and the second respondent (Adam) are brothers. For a number of years they operated a house building business on the West Coast of the South Island under a franchise agreement with Deacon Holdings Ltd, trading as G J Gardner Homes. This involved two companies, Housing West Coast Ltd which owned the building franchise, and Colville Developments Ltd, which was a separate

entity that owned the land on which the houses were built. The houses were then sold as a land and house package. In October 2020 Mathew purchased Adam's share of this business after they fell out. The falling out arose after Adam had personal difficulties which came to the attention of G J Gardner Homes

4 Housing West Coast Ltd was valued and under the sale and purchase agreement, Mathew purchased Adam's 50 per cent share for $1.062 million. The primary value of the business was assessed to be in its goodwill. The agreement included restraint of trade clauses in the following terms:

1. THE Vendor covenants with the PURCHASER that he will not directly or indirectly be engage, participate in or have any direct or indirect interest whether as an owner, partner, director, shareholder, officer, employee, agent, consultant, representative, contractor or sub-contractor or in any other capacity in the business detailed in the schedule in competition with Housing West Coast Limited.

2. This restraint as outlined in point 1. above will relate to the area and until the end of the term detailed in the in the schedule and the schedule forms part of this deed.

3. Notwithstanding the restraint the Vendor is permitted to be employed as builder's labourer and to build his own home.

5 The relevant area of the restraint was defined as the Buller, Grey and Westland Districts. The relevant business involved the marketing, construction and sale of homes (as more elaborately defined), and the relevant period was 19 October 2020 until 1 February 2023. There has been no challenge to the reasonableness of the terms of the restraint.

6 Peter, Mathew and Adam all knew each other. Between 2007 and 2014 Peter and his wife had owned and operated a Stonewood Homes franchise on the West Coast, and thereafter Peter ran his own building business. Around January 2021 Peter became aware that Adam was no longer working with his brother and was looking for work. Peter and Adam then discussed the situation. Adam told Peter that he had signed a restraint of trade but that he was allowed to work as a building labourer. Adam started working with Peter on 1 March 2021.

7 On 3 March Adam sent Mathew a text requesting him to waive the restraint. Adam said that somebody else was trying to bring a housing company to the West Coast, and that letting him do that himself would scare them off. Mathew did not agree.

8 On 7 April Peter then sent the franchise manager of Stonewood Homes an email saying he was in the process of completing an application to be the West Coast franchisee. Included in Peter's email was the following:

I trust that anything we say will also be treated with confidence.

The reason being my business partner is going through a business buyout and if news of a new venture got out it could jeopardise that settlement.

I trust you will understand this.

9 There was no dispute that the business partner being referred to was Adam. But Peter and Adam argued that the partnership being referred to was a land subdivision business, not a building business competing with Housing West Coast Ltd.

10 On 13 May 2021 Peter incorporated West Coast Residential Ltd. Peter and his wife each held 50 per cent, and Peter was the sole director. This company purchased the Stonewood Homes franchise on 18 May 2021. On 20 May 2021 Adam and Peter then incorporated Hammer Down Developments Ltd. Each was a director. Adam owned 50 per cent and Peter and his wife owned the other 50 per cent. This company was used to acquire and subdivide land for the purposes of sale. Adam and Peter argued at trial that their ownership and operation of this entity did not breach the restraint of trade as it was not involved in building houses.

11 There was some disputed evidence at trial as to Adam's subsequent involvement with Stonewood Homes in May and June 2021. A Snapchat message sent by Adam around this time included a photograph of the Stonewood Homes offices in Auckland with the narration “my new family”. There was a dispute at trial as to when this message was sent. Peter said that he had visited those offices on 18 May to sign the Stonewood franchise agreement, and Adam's only visit to the head office was in June 2021.

12 An email generated by Stonewood Homes head office to its preferred suppliers dated 3 June 2021 stated:

We are delighted to welcome Peter & Adam as our newest Franchisee to the Stonewood family.

Similarly in an internal email in June, Stonewood Homes made arrangements for Adam to have access to the West Coast franchisee's mailbox within the Stonewood network. Moreover Adam attended Stonewood's Auckland offices at this time, and Adam received induction training. The following day Adam and Peter also attended a national suppliers' expo.

13 The Judge described some of Adam and Peter's evidence about the interactions with Stonewood Homes as unsatisfactory, 2 and relied on the fact that no one from Stonewood Homes gave evidence to respond to the inferences that could be drawn from the Stonewood Homes material. 3

14 Adam also funded the new business. On 21 May Adam withdrew $300,000 from the bank account of Colville Developments Ltd, to which he still had access. Of that amount, $200,000 was then invested by Adam into West Coast Residential Ltd. The narration on the documents recording the deposit states “Owner A Funds Introduced”. $50,000 of the funds so introduced was then used to pay for the Stonewood Homes franchise, and another $50,000 was used by Peter's pre-existing building company, Peter Blight Builders Ltd, for general operating costs. The advance was not documented. Peter and Adam gave evidence that the money was paid on a “handshake” because Peter needed operational funds for West Coast...