Mayhew v Future Mobility Solutions Ltd (formerly Sealegs Corporation Ltd)
| Jurisdiction | New Zealand |
| Judge | Smith |
| Judgment Date | 29 November 2018 |
| Neutral Citation | [2018] NZHC 3112 |
| Docket Number | CIV-2018-404-1292 |
| Court | High Court |
| Date | 29 November 2018 |
CIV-2018-404-1292
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
Arbitration. Civil Procedure — application for stay of proceedings — contractual dispute — arbitration clause — first defendant not a party to arbitration agreement — overlapping causes of action between defendants — Arbitration Act 1996
P D Sills for the Plaintiffs
B P Henry and S Singh for the Defendants
JUDGMENT OF ASSOCIATE JUDGE Smith
The defendants apply for an order staying the proceeding, on the grounds that the claims in the proceeding are required to be submitted to arbitration. The plaintiffs oppose the application.
The first plaintiff (Mr Mayhew) is a businessman who resides in North Carolina, United States of America. He is the director and shareholder of the second plaintiff (Carolina).
The first defendant (Future Mobility) is a New Zealand company that carries on business developing and manufacturing amphibious craft (including “Sealegs” products). The second defendant (Sealegs International) is a wholly owned subsidiary of Future Mobility. Sealegs International is responsible for international sales for and on behalf of Future Mobility.
Carolina is a company incorporated under the laws of North Carolina. It carries on business reselling products supplied by Sealegs International.
The third defendant (Mr McKee-Wright) is the chief executive officer of Future Mobility. Mr McKee-Wright is also a director of Sealegs International.
Mr Mayhew visited Future Mobility's factory at Albany in early 2014. He met with Mr McKee-Wright, and he was shown a promotional video for Sealegs products. He says that certain representations regarding the quality of Sealegs products were made to him in the course of this visit.
On 26 June 2014 Mr Mayhew entered into a written agreement with Sealegs International (the 2014 Agreement), under which he was appointed as representative for the sale of Sealegs products in North Carolina and South Carolina (the Territory). The 2014 Agreement was for an initial term of 18 months, ending on 31 December 2015.
Under the 2014 Agreement, Mr Mayhew agreed to purchase five boats, and to arrange for two stocking dealers, with showroom and office facilities, to service potential clients within the Territory. Sealegs International was to provide Mr Mayhew with information relating to the Sealegs products which would be necessary for the performance of Mr Mayhew's duties under the 2014 Agreement. Sealegs International would also provide all North America/New Zealand based training, parts and instruction, to ensure that Mr Mayhew could competently service its customers within the Territory.
Mr Mayhew contends that the 2014 Agreement included implied terms that Sealegs International would facilitate, and would not hinder, his efforts to resell the Sealegs products in the Territory. He alleges that there was a further implied term under which the parties agreed to deal with each other pursuant to the 2014 Agreement fairly and in good faith. The defendants deny that there were any such implied terms.
Mr Mayhew purchased one Sealegs craft (the First Craft), and he says that it had a number of defects. The defendants accept that he purchased the First Craft, and that he raised issues about it, but they deny that the First Craft had the defects alleged by Mr Mayhew.
Mr Mayhew had another tour of Future Mobility's factory in early 2015. He says (and the defendants deny) that he and other attendees were told about the high quality of Sealegs products in the course of this visit.
A second agreement (the 2015 Agreement) was entered into between Carolina and Sealegs International, on 19 March 2015. Under the 2015 Agreement, Sealegs International appointed Mr Mayhew or his nominee to be its reseller in the Territory, until 31 December 2016. Mr Mayhew's nominee was Carolina.
The 2015 Agreement provided that Carolina would purchase one Sealegs craft (the Second Craft). The 2015 Agreement was renewable every 12 months, provided Carolina committed to purchase four Sealegs craft during the period, and complied with the requirements of the 2015 Agreement. Carolina was given exclusive reseller rights in the Territory for Sealegs products during the term of the 2015 Agreement.
The plaintiffs allege that the 2015 Agreement contained the same implied terms as those the plaintiffs allege were included in the 2014 Agreement. That is denied by the defendants.
The plaintiffs allege that there were faults with the Second Craft (alleged issues with engagement of the electrical diff lock, and an alleged crack in the Sealegs System). Those allegations are denied by the defendants.
The plaintiffs also allege that Mr McKee-Wright told Mr Mayhew that Future Mobility and Sealegs International were running down their operations in the United States. Various Sealegs International staff in North America were alleged to have quit their posts.
Mr Mayhew says that Mr McKee-Wright and a North American representative of Sealegs International encouraged him to pursue market opportunities for Sealegs products in Canada. He says that he was given assurances by Mr McKee-Wright that he would be paid some form of commission in relation to the Canadian territory, but no commission or other payments were forthcoming.
The plaintiffs say that they endeavoured to get Sealegs International to participate in various other market opportunities in North America, but the defendants failed to act on their initiatives. All of these allegations are denied by the defendants.
The plaintiffs plead six causes of action.
First, Mr Mayhew claims against Future Mobility for alleged negligent misstatement arising out of the statements said to have been made by Mr McKee-Wright to Mr Mayhew in the course of the visit by Mr Mayhew to the Albany factory in early 2014. Mr Mayhew contends that the alleged representations (relating to the reliability and claimed high quality of the Sealegs craft) were false. He says that the alleged defects were readily apparent in the First Craft, and the defendants must have known of the defects. He asks for damages, to be quantified at trial, together with interest and costs.
Future Mobility denies all of the allegations of misrepresentation, negligence, and damage alleged against it.
In the second cause of action, Mr Mayhew alleges breach of contract by Sealegs International. He says that Sealegs International breached the 2014 Agreement by failing to provide him with necessary information relating to the Sealegs products, failing to ensure that he would be able to competently serve his customers within the Territory, and failing to facilitate (and/or hindering) his efforts to sell Sealegs products in the Territory. Mr Mayhew also contends that Sealegs International failed to repair the defects in the First Craft within a reasonable time, and that it generally failed to take any steps to enhance the sale of Sealegs products within the Territory. He says that the failure by Sealegs International to take any steps to enhance the sale of the Sealegs products within the Territory amounted to a breach of its duty to deal with him in good faith.
As a result of the alleged breaches, Mr Mayhew says that he incurred costs in pursuing sales in the Territory that were hindered by Sealegs International, and that he lost the opportunity to sell Sealegs products to customers. He seeks damages, to be quantified at trial, interest, and costs.
Again, the defendants deny the allegations in this cause of action.
The third and fourth causes of action are brought by Carolina against Future Mobility (third cause of action) and Sealegs International (fourth cause of action). The third cause of action alleges that Future Mobility was responsible for representations made to Mr Mayhew in 2015, to the effect that Sealegs craft were reliable and of high quality. Carolina alleges that these statements were false, and were made negligently, as the Second Craft was found to be of poor quality shortly after the statements were made. Carolina alleges that these representations were made with the intention that Carolina would enter into the 2015 Agreement, and that it did enter into the 2015 Agreement in reliance on the representations. Carolina seeks damages from Future Mobility on its third cause of action, in a sum to be quantified at trial. It also seeks interest and costs.
In its fourth cause of action, Carolina appears to allege that Sealegs International was also responsible for the representations said to have been made to Mr Mayhew and others in early 2015. It contends that these representations were false, as evidenced by the alleged poor quality of the Second Craft.
Carolina alleges in the fourth cause of action that the 2015 representations were made with the intention of inducing it to enter into the 2015 Agreement, and that they had that effect. It alleges that it has suffered loss as a result, and it seek damages to be quantified at trial, interest, and costs.
The defendants deny all of the allegations of breach of duty, causation, and alleged loss pleaded by Carolina in the third and fourth causes of action.
In the fifth cause of action, Carolina alleges breach of contract by Sealegs International. Sealegs International is said to have breached the 2015 Agreement by failing to provide...
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