Matvin Group Ltd v Crown Finance Ltd
| Jurisdiction | New Zealand |
| Judge | Duffy J |
| Judgment Date | 02 September 2022 |
| Neutral Citation | [2022] NZHC 2239 |
| Docket Number | CIV 2019-404-000402 |
| Court | High Court |
[2022] NZHC 2239
Duffy J
CIV 2019-404-000402
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA
TĀMAKI MAKAURAU ROHE
Contract, Equity — claim for breach of verbal joint venture agreement — cancellation — breach of obligations — role of mezzanine financiers — existence of fiduciary duty — misuse of confidential information — dishonest assistance
P Dale QC and L Meys for Plaintiff
G Kohler QC and P Friendlander for First and Second Defendants
D Chisholm QC for Third Defendant
This judgment was delivered by me on 2 September 2022 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
On 29 July 2013 the first plaintiff, Matvin Group Ltd (Matvin) entered into a sale and purchase agreement which provided for Matvin or its nominee to purchase 4.5 hectares of land at 122 Hobsonville Road, Hobsonville for $14.5 million. The second plaintiff, Hobsonville Development Ltd (HDL), was the nominee in this agreement.
Matvin is a property developer; it uses finance from other sources to acquire its land purchases. The agreement to purchase 122 Hobsonville Road was conditional on Matvin completing due diligence, which included obtaining finance for the deposit of $1.45 million by 9 September 2013. Matvin managed to pay the deposit but only after negotiating an extension of the due diligence date. However, it was unable to settle the purchase on time due to lack of funds, and the vendor cancelled the agreement.
The first defendant, Crown Finance Ltd (Crown) is what is known in the property development business as a mezzanine financier. The second defendant, Crown Asia Pacific Group Ltd (CAPGL) is an investor. The third defendant, Viscount Investment Corporation Ltd (Viscount) is the party that purchased 122 Hobsonville Road from the vendor following cancellation of the agreement with Matvin. The first to third defendants have a common director, Christopher Arbuckle, and a common shareholder, HWI Nominees Limited. Together the defendants comprise what is known as the Crown Asia Pacific Group (CAPG).
Key issues in this proceeding are: (a) how to characterise the legal relationship between Matvin and HDL with Crown and CAPGL; (b) how Matvin's purchase of 122 Hobsonville Road came to be cancelled by the vendor; and (c) the aftermath, including how Viscount came to purchase this land and the role Crown and CAPGL played in that event.
Put shortly, Matvin and HDL contend that their purchase of 122 Hobsonville Road was part of a joint venture project with Crown and CAPGL to develop this land. The project never eventuated because of wrongful and legally actionable conduct on the part of Crown and CAPGL. This conduct led Viscount to purchase the land in circumstances which also left Viscount legally liable to Matvin and HDL. On the other hand, the defendants contend that Crown did no more than offer finance to Matvin, which it ultimately chose to reject. Without finance neither Matvin nor HDL could complete purchase of 122 Hobsonville Road, so the vendor cancelled the agreement. This left Viscount free to purchase the property, which it did successfully.
Matvin and HDL bring the following claims: (a) as against Crown and CAPGL, claims alleging breach of joint venture obligations and breach of fiduciary obligations as lender; (b) as against all defendants, claims alleging misuse of confidential information that Crown had received from Matvin and estoppel; and (c) as against Viscount, a claim in dishonest assistance. 1 A claim for breach of obligations owed under a Pallant v Morgan equity was abandoned at the hearing.
Each defendant denies the claims made against it. Each pleads defences of lack of clean hands, acquiescence and delay. Crown and CAPGL also brought a counterclaim against Matvin, but this was abandoned at the hearing.
Matvin is a private limited liability company. Fifty percent of its shareholding is held by Kevin James Clark and the other fifty percent is held by Matthew Stephen Ellingham. They both are directors of Matvin.
Mr Clark has tertiary qualifications in valuation and property management. He is an associate member of the Real Estate Institute of New Zealand. He has been active in property development and investment since 1998. Mr Ellingham is a qualified carpenter with experience in the building and property development industry. Mr Clark and Mr Ellingham have worked together in property development/investment, and through Matvin, since early 2000.
Christopher John Arbuckle is the sole director and chief executive officer of Crown. He is also one of Crown's two-person Credit Committee. He is also a director of CAPGL and Viscount. He holds no shares in any of the companies in the CAPG. Mr Arbuckle has worked in property finance and investment for 40 years. 2
John Copson's work history is in banking and finance. 3 Since 2004 his interests have been concentrated on long-term commercial property investments, which include the defendants in this proceeding. Shares in the defendants are wholly owned by HWI Nominees Ltd in trust for the Copson Family Trust. Mr Copson is the other member of Crown's Credit Committee. His involvement with Crown is in that capacity. In his evidence he described the Credit Committee as responsible for reviewing all applications for finance over $1 million. He stated that it was through his oversight on the Credit Committee that he made the final decisions on Crown's “more significant transactions”. Mr Copson's exact connection with the Copson Family Trust was not stated in evidence.
Around 2005 when Pierce Corbett first became known to Mr Clark and Mr Ellingham, he was a commercial real estate broker employed by Colliers North Shore. Between 2008 and 2010 he was out of New Zealand and in early 2011 when he returned, he worked with CB Richard Ellis. In 2012 Mr Corbett entered into a contract for services with Crown Mutual Ltd, one of the companies in the CAPG.
By the end of the hearing it was common ground that Mr Corbett was engaged by Crown Mutual Ltd as an independent contractor. His role was to provide a range of services which included identifying and gathering information on opportunities offered by real estate assets that met the portfolio desired characteristics of CAPG. He worked on commission. He reported to Mr Arbuckle, regularly sending status reports on his activities. Whether Mr Corbett acted as Crown's agent in the discussions he
Mr Clark and Mr Ellingham gave evidence for Matvin. Mr Arbuckle and Mr Copson gave evidence for Crown. Mr Corbett did not give evidence. In opening Mr Kohler QC, counsel for Crown and CAPGL said that those defendants had served a brief of evidence for Mr Corbett, but whether any persons whose briefs had been served would be called depended on how the trial proceeded.
When Mr Kohler later indicated that Mr Corbett would not be called no-one at the hearing addressed how the decision not to call him affected the admission of evidence in the trial. Written documents prepared by Mr Corbett are in the bundle of documents. Witnesses for both Matvin and Crown and CAPGL gave evidence in chief and under cross-examination that recounted what Mr Corbett had said and done. Such evidence would not be hearsay if Mr Corbett had been called to give evidence. 4 However because he ultimately was not called to give evidence much, if not all, of what other witnesses have said about him in their evidence, and the documents he prepared, are now hearsay. Since no-one at trial raised any objection to the affected evidence based on this change of status, I am proceeding on the basis the evidence remains admissible. However, the fact I have not heard explanations Mr Corbett could offer for his conduct necessarily affects the weight I can place on what other witnesses have said about him or what the parties might have me understand from the documents he has prepared.
There is a further and separate issue regarding the inferences I may draw from the decision not to call Mr Corbett's evidence. 5 I shall address this topic later.
In 2013 Mr Corbett entered into a contract with Crown Mutual Ltd, a company within CAPG, to provide services. The contract commenced on 2 April 2013. Mr Corbett was to report to Mr Arbuckle who was described in the contract as the general manager at CPAG. Mr Corbett's role was to undertake redevelopment schemes for specific areas, namely Albany, South Auckland and Hamilton, perform feasibility analysis to assess financial viability of schemes, promote and market the scheme to generate interest and “de-risk” potential development, undertake resource and building consent applications, project manage consultants within defined budgets, and negotiate and secure tenancy arrangements for the new development. He was to organise construction tenders and project manage the construction phase of a development or source an appropriate development partner. He was also to identify and gather information on select real estate assets that met portfolio desired characteristics, to undertake cash flow analysis to determine the attractiveness of the investment opportunity and to evaluate the potential investment for trade. This work entailed contacting and meeting with respective owners and proposing terms on which a purchase could occur. He was to negotiate the most advantageous acquisition price and settlement terms and to source and negotiate future occupancy...
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