SPECIALISED LIVESTOCK IMPORTS LIMITED v PHILIP BENDALL & ORS [2002] NZCA 62 (28 March 2002)

IN THE COURT OF APPEAL OF NEW ZEALAND

ca72/01

	between	specialised livestock imports limited
		First Appellant

	AND	philip bendall
		Second Appellant

	AND	gordon clifton bendall
		Third Appellant

	AND	doreen louisa bendall
		Fourth Appellant

	AND	ostrich import and quarantine (1996) limited
		Fifth Appellant

	AND	eo exports limited
		Sixth Appellant

	and	darren donald borrie, michele christine borrie, gary hemmingson and carol hemmingson (trading as park estate partnership)
		First Respondents

	and	darren donald borrie and MICHELE CHRISTINE BORRIE
		Second Respondents

	and	PETER ARMSTRONG and JENNY ARMSTRONG
		Third Respondents

	and	terry cameron and kay cameron
		Fourth Respondents

	and	john de vries
		Fifth Respondent

	and	shane dick and donna dick
		Sixth Respondents

	and	paul douglas ekdahl and kauri holdings ltd
		Seventh Respondents

	and	russell hawkins
		Eighth Respondent

	and	colin judd
		Ninth Respondent

	and	DAVID JUDGE and KERRY JUDGE
		Tenth Respondents

	and	DENIS RICKABY and ALICE RICKABY
		Eleventh Respondents

	and	SHANTALLA ENTERPRISE LIMITED
		Twelfth Respondent

	and	bay of plenty ostriches limited
		Thirteenth Respondent

	and	robert bain, david turnbull and ron van der horst
		Fourteenth Respondents

	and	james ross, ian ross and selwyn robertson
		Fifteenth Respondent

Hearing:	20 February 2002
Coram:	McGrath J Robertson J Randerson J
Appearances:	T C Weston QC and G D Jones for Appellants G J Kohler and T A Spinka for Respondents
Judgment:	28 March 2002

interim judgment of the court delivered by mcgrath j

Introduction

[1] This appeal concerns contracts for the purchase of live ostriches (the ostriches contracts).There is a cross appeal which is concerned with contracts for importation of ostrich eggs (the ostrich egg contracts).In the High Court the fifteen respondents to this appeal sued the six appellants for breaches of the ostriches contract which each respondent had entered into with Specialised Livestock Imports Limited, the first appellant.They sued the six appellants also for misleading and deceptive conduct under the Fair Trading Act 1986.Five respondents were also parties to an ostrich egg contract and they each sued for breach of contract and under the Fair Trading Act on the same basis as they did under the ostrich egg contracts.

[2] In the High Court, following an extended hearing, Cartwright J entered judgment in favour of each of the respondents' on their claims concerning their ostriches contracts and associated misrepresentations.While all six appellants appealed, the appeal is now pursued only by the three personal appellants, Gordon Bendall and Doreen Bendall (the Bendall parents) and their son Philip Bendall.

Background facts

[3] At all relevant times the Bendall parents owned a property at Te Puna which they farmed in partnership, raising ostriches as part of their farming business.Philip Bendall developed two business schemes in association with the Bendall parents which came to be incorporated in the two types of contract with which this litigation is concerned.The first scheme was for the importation from Australia, and sale, of live ostriches which would become breeding stock in New Zealand.The second scheme involved importation of ostrich eggs from Australia and their sale in New Zealand.

[4] The vehicle for the live ostriches scheme was Specialised Livestock (originally named Ostrich Import Quarantine Limited and referred to in this judgment as OIQL).At some stage OIQL assigned its interest in the ostrich contracts to Ostrich & Import Quarantine (1996) Limited (OIQ 1996).Those two companies are the first and fifth appellants.The share capital in each of those companies has been held by the Bendall parents and Philip Bendall in approximately equal shares.The vehicle for the ostrich eggs contract was EO Exports Limited (originally called OIQ Limited), the sixth appellant. Its shares were likewise held by the Bendall parents and Philip Bendall.Philip Bendall is the second appellant and the Bendall parents are respectively, the third and fourth appellants.

[5] Under the ostriches contracts they entered into with OIQL, the respondents agreed to buy, and OIQL to sell, Australian born ostriches, which would be specified, and in which microchips would be implanted for purposes of their identification.OIQL would insure the birds and import them holding them in a quarantine facility owned by the Bendall parents, situated on their farm.The ostriches contracts provided for payment of 10% of the purchase price by way of deposit, and of 60% on allocation of the stock, so that 70% of the price of each bird was to be paid prior to importation of the birds into New Zealand.

[6] At various times the appellants distributed promotional material to the respondents, both prior to and after OIQL had entered into contracts with them. The respondents alleged that in this material, which included pamphlets and newsletters, and in the course of various oral communications with them they were respectively induced to enter into the ostriches contracts.There were three different versions of the contract concerned.The number of birds, prices payable and contract dates also varied for each contract.

[7] In addition five of the respondents also entered into ostrich eggs contracts with OIQL.They were Mr and Mrs Armstrong, Mr and Mrs Cameron, Mr de Vries, Mr Ekdahl and Mr and Mrs Judge, who are respectively the third, fourth, fifth, seventh and tenth respondents.Under the ostrich eggs contracts OIQL agreed to import incubate and quarantine ostrich eggs produced by the respondents' ostriches in Australia.A pooling scheme was to operate and resulting chicks shared among contracting respondents. Under the ostrich eggs contracts these respondents paid the monies outstanding under their ostriches contracts, that is the final 30%.Ostrich eggs were imported under these contracts and quarantined in facilities on the farm of the Bendall parents. Some respondents did receive ostrich chicks but by the time of trial all had died.

[8] The respondents entered into the ostrich contracts over a period of 12 months.Mr and Mrs Borrie, who on their own account are the second respondents, initially, on 14 September 1994, entered into agreements for early delivery of imported ostriches on terms set out in a priority registration form.On 4 December the Borries also entered into an ostriches contract, as did the first respondent, the Park Estate partnership which comprised Mr and Mrs Borrie and Mr and Mrs Hemmingson.On the same day Mr Ekdahl and Kauri Holdings (who together are the seventh respondents) and Mr and Mrs Judge (the tenth respondents) also entered into contracts.At this time the Ministry of Agriculture and Fisheries was moving towards permitting the importation into New Zealand of live ostriches from Australia.Between 4 December 1994 and 27 March 1995, the fifth appellant along with Mr and Mrs Dick, Mr Hawkins, Mr and Mrs Rickaby and Messrs Ross, Ross and Robertson, who are respectively the sixth, eighth, eleventh and fifteenth respondents, entered into their ostriches contracts with OIQL.On 1 April 1995 the Ministry suspended the importation of live ostriches.Thereafter ostriches contracts were entered into between April and August 1995by the fourth respondents, Mr and Mrs Cameron, Shantalla Enterprise Limited (the twelfth respondent) and Mr Judd, (the ninth respondent), and Bay of Plenty Ostriches Limited (the thirteenth respondent). On 1 September 1995 the Ministry lifted the ban on importation.Further ostriches contracts were entered into in September 1995 by the third respondents, Mr and Mrs Armstrong, and Messrs Bain, Turnball and Van der Horst who together are the fourteenth respondents.The Ministry reinstated its ban on 20 February 1996.

[9] No live ostriches were ever imported into New Zealand under the ostriches contracts.Delays were partly due to the Ministry's periodic bans on importation but it was alleged there were other reasons as well.A number of ostriches subject to contracts died in Australia.Not all of those which died were insured, but according to Philip Bendall those which died were replaced. There was considerable dispute over the extent to which respondents were informed of these matters. The respondents eventually all cancelled their contracts because of the lengthy delays in importation.The appellants, however, contended that the cancellations amounted to repudiation by the respondents of their contracts.

[10] In September 1997 the respondents jointly issued these proceedings in the High Court against the six appellants.They alleged breaches of contract, and misleading and deceptive conduct under ss 9, 13(1)(a) and 22 of the Fair Trading Act 1986.They also alleged breach of s9 of the Sale of Goods Act 1908.As indicated judgment was entered in favour of all respondents against every appellant.This appeal however is principally concerned with the alleged misrepresentations of the Bendall parents and Philip Bendall and is advanced by them alone.

The High Court judgment

[11] At an early stage in her judgment Cartwright J drew a sharp distinction between the content of the evidence given at the trial by the respondents on the one hand and that given by the Bendall parents and Philip Bendall on the other, concerning the nature and extent of representations they were said to have made.The Judge said this had put credibility in issue.On that the Judge said:

I accept that the credibility of the witnesses whose evidence I have heard is an essential element of this case in which the plaintiffs have relied primarily on the provisions of the Fair Trading Act.

Although it will be necessary to make specific findings of fact which are dependent on findings on the credibility or reliability of individual witnesses, overall I formed a clear view that the evidence of each of the plaintiffs was to be preferred to that of Gordon, Doreen or Philip Bendall. Gordon and Doreen Bendall were at pains to distance themselves from the activities of their son in relation to the contracts entered into by the plaintiffs, professing to have little knowledge or understanding of the importation business operated by their son.Both claimed to have undertaken little or no work for the relevant companies although together holding 66% of the shareholding and drawing or having credited in the accounts, significant sums as shareholders.I do not accept that their evidence was credible and reliable.

Philip Bendall was clearly the driving force behind the live Ostrich and egg importation schemes.He gave extensive evidence during which he portrayed himself as an enterprising and skilled businessman who, but for the repudiation of the live Ostrich importation contracts by the plaintiffs, would have imported and delivered to the plaintiffs high quality breeding stock as required under the various contracts.He had an explanation for every allegation and remained unshaken in his confident responses even when caught out.His evidence did not impress me as honest and open but rather as a calculated attempt to mislead.

The plaintiffs, although now united as a consequence of their claims and in their obvious mistrust of all Bendalls, come from different parts of New Zealand and from widely differing backgrounds.While it would have been possible to conspire to develop a common story, I did not gain this impression of any of them.Although all have lost large sums of money, their evidence was direct and honestly given.Common themes emerged, for example when they denied receiving oral warnings from any of the Bendalls of the high risks of the ventures.I accept that all gained the clear impression that Gordon, Doreen and Philip Bendall were equally involved in the importing business albeit holding differing responsibilities, and that all completely trusted and relied on the Bendalls' expertise at live Ostrich and egg importers.

[12] There were five heads of misrepresentation alleged by the respondents in the High Court.The first concerned the expertise of each of the Bendalls. The Judge found that Philip Bendall held himself out as an expert in matters relating to the importation of ostriches and that the Bendall parents were also equipped to and did advise on those matters.A contention that they were fully occupied with their farming business and helped Philip Bendall with the ostrich schemes at only a superficial level was rejected by the Judge.The Bendall parents raised ostriches and demonstrated them to potential purchasers on their farm.Mrs Bendall conducted and had recorded many discussions she had with potential purchasers, some of which involved health issues.They had both held themselves out as experts as claimed.

[13] Linked to the allegations of representations of expertise by the Bendalls were those of their ability to successfully import the ostriches.The Judge found however that Philip Bendall was aware of the risks of border closure and of failing to fulfil contracts for importation at three intermittent periods when the border was open.Philip Bendall also knew there was a high mortality rate and that this was a real risk of the venture.It was alleged by the respondents that, in light of these known risks, there was no sound basis for making representations of confidence, even certainty, that the appellants could successfully importthe ostriches from Australia.

[14] The third head of misrepresentation concerned when importation would take place.It was allegedly said the timing would be such as to allow participation by the respondents in a breeding phase of the industry - a period of no more than 6 to 8 years.The alleged representation was that this phase would be very profitable with its high returns diminishing thereafter.The Judge, however, distinguished such advice and representations as to profits from those involving claims of technical expertise.The Judge was not satisfied that the former gave rise to misleading and deceptive conduct even though they were not balanced by warnings of the risk.

[15] The fourth head of misrepresentation concerned the quality of the livestock being imported and sold.The alleged representation initially was that the imported ostriches would be individually selected from the top 10% of stock.Thereafter the more general assertions were emphasised by reference to verifiable bloodstock records, to undertakings to handpick chicks, and to statementsthat specialised veterinarians would certify stock.The Judge found the reality was different.Stock was bulk purchased and there was no intention of fulfilling representations as to bloodlines.

[16] Fifthly, the respondents complained of misleading and deceptive representations that the respondents' ostriches would be fully insured while in Australia.The appellants' promotional material had referred to the ostriches being fully insured for all risks in Australia from the time title to them was taken at 3 months of age.This was reflected in terms of the different ostriches contracts.The breach of duty alleged was that OIQL had no intention of arranging commercial insurance but simply assumed the risk.The Judge took the view that the material concerned was misleading and deceptive.

[17] After discussing the legal principles applicable to representations of future conduct or events, where the representation is not performed, the Judge further observed that the appellants had, from the outset, misrepresented their ability to import successfully, and the quality of the breeding stock, and said:

At the time of making each representation listed above, with the exception of that relating to insurance, the defendants had no proper basis for making the representations.Their knowledge of the industry, of the mortality rate of the Ostriches, the border closures and the deliberate policy of purchasing birds which were not demonstrably from the premier bloodstock promised all point to a conclusion that the defendants had no intention of fulfilling the representations made in writing or orally.Therefore the defendants fail in their submission that the representations became incorrect or misleading only because they were not performed.

and later:

Failure to advise new or repeat customers of the high death rate was an actionable misrepresentation.

[18] In relation to insurance the Judge also observed that the representation that the birds would be insured during the quarantine period was false or misleading in a material particular concerning the risk of the enterprise. This was another element inducing the respondents to enter the project and keeping them in it.Failing to insure was a breach of duty.The Judge was also satisfied the defendants had falsely represented the high standard or quality of the birds.

[19] Having made these general findings concerning the appellants' conduct and in particular that of the Bendalls, the Judge considered individually the circumstances of each of the respondents' claims.For reasons we shall shortly elaborate it is unnecessary for us to outline what the Judge said of each of the respondents' situations individually in her judgment.In each instance the Judge outlined the information received by the respondent concerned and representations it included.The meetings and discussions with the Bendalls concerning the arrival of ostriches and later the state of health of chicks were also referred to by the Judge who made findings as to misleading and deceptive conduct and effect of misrepresentations in causing particular respondents to enter into contracts.There are findings in a number of instances as to whether the border was open or not when contracts were entered into and whether respondents were informed of the death of ostriches allocated to their contracts and of substitutions where they took place.Findings of breach of ss 9, 13 and 22 of the Fair Trading Act are also made and judgment given in each case for 70% of the contract price paid and in some cases, other sums paid.

[20] The claim under s9 of the Sale of Goods Act was complicated by evidential difficulties in establishing when birds had died, but findings in favour of the respondents were made in relation to the original birds which could be classed as specific goods.

Were the appellants in trade?

[21] The Judge foundthat each of the Bendalls had breached the prohibitory duties imposed by ss9, 13(1)(a) and 22 of the Fair Trading Act.The first ground of appeal argued by Mr Weston QC on behalf of the three Bendalls concerned the findings of breaches of ss9 and 13.So far as relevant to this appeal those sections provide as follows:

9 MISLEADING AND DECEPTIVE CONDUCT GENERALLY-

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

...

13 FALSE REPRESENTATIONS-

No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,--

(a)Falsely represent that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use;

[22] These duties are expressed to apply only to those "in trade".It was Mr Weston's contention that the Judge had found that the Bendalls were not engaged in trade at the time they made the representations said to be in breach of ss9 and 13.On that basis he sought to have those findings against them set aside.

[23] To understand the basis of the findings that are challenged it is necessary to elaborate on the Judge's reasoning.The basis of the claim under ss9 and 13 was that the Bendalls had each either made the representations concerned or, in the case of the Bendall parents, failed to distance themselves from Philip Bendall's representations or aided and abetted him in making them. On this basis each of the Bendalls was found to have breached the statutory duties concerned.In the passage in the judgment in which Mr Weston submitted the Judge had found that the Bendalls were not engaged "in trade" the Judge said:

[102]Under ss9 and 13 of the Act the plaintiffs must establish that the defendants are in trade.To establish liability under s9 it is not necessary to show an intention to mislead or deceive.There can be no doubt that OIQL was engaged in the trade of importing Ostriches.There is however, no suggestion that any of the Bendalls were so engaged, independently of that company.Their role will fall to be considered under s45 of the Act.

[24] Later in the judgment the Judge set out s45.It relevantly provides:

45. Conduct by servants or agents

(2) Any conduct engaged in on behalf of a body corporate-

(a) By a director, servant, or agent of the body corporate, acting within that scope of that person's actual or apparent authority;or

(b) By any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant, or agent of the body corporate, given within the scope of the actual or apparent authority of the director, servant or agent-

Shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.

[25] The Judge held that the conduct of each of the Bendalls which was in breach of ss9 and 13 was caught by s45(2) and was therefore deemed to be that of the corporate defendants.In the words of s45(2) it was "engaged in also by the body corporate".That established the liability of the corporate defendants, on behalf of which the Bendalls were acting.The next question was whether the Bendalls were individually in breach and liable under the Act.

[26] Here the word "also" in s45(2)was considered by the Judge to be critical.In her view it indicated that the conduct of the person, which was deemed to be that of the company, remained for purposes of individual liability under the Act, as well, the person's own conduct.The Judge here applied the approach to interpretation of s45(2) that had been taken by Tipping J in Megavitamin & Stewart v Commerce Commission (1995) 6 TCLR 231, 236. Cartwright J acknowledged that to be personally liable under ss9 and 13, in addition to the company, each of the Bendalls had to have individually acted in a way that breached one or more of their statutory duties under the provisions concerned.Mr Weston's argument was that as in para [102] of her judgment Cartwright J had found the Bendalls were not themselves "in trade" it was not open to her to find they had individually acted in breach of ss9 and 13, even if they had caused the companies to do so.

[27] The short answer to the point is that in observing in para [102] that there was no suggestion that any of the Bendalls were engaged in trade "independently of the company," Cartwright J did not decide they were not in trade at all.Her Honour was saying no more than that the Bendalls were not in trade on their own account, or otherwise than through OIQL or their other companies.The confinement of the prohibitions in ss9 and 13 to conduct "in trade" is not intended to focus on the general trading status of those acting contrary to its terms and that status is not of itself determinative of whether persons are "in trade" in terms of ss9 and 13 in the course of their activities on behalf of a company.The qualification is rather directed to the nature of the conduct said to be misleading or deceptive or otherwise in breach of, in this case, ss9 and 13.

[28] In our view, and contrary to the submission of Mr Weston, it is implicit in the findings of the Judge as to the personal liability of each of the Bendalls that she held them to be in trade in the course of their relevant activities on behalf of OIQL and the other appellant companies.By providing their services, when they made representations to the respondents, the Bendalls acted in furtherance of the company's trading interests and activities. Furthermore, the Bendalls' own personal associations with the companies are reflected both in their respective one third shareholding interests and in the case of the Bendall parents in drawings from OIQL reflected in sums credited to their current accounts of $225,270 in the 1995 year and $60,000 in the1996 year.Together these circumstances clearly established that each of the Bendalls was in trade in his or her activities on behalf of their companies. That element of ss9 and 13 is accordingly made out and Mr Weston's argument on the point fails.

[29] For the sake of completeness we also point out that orders to pay damages under s43(1)(b) of the Fair Trading Act can be made against those who, while not themselves contravening the Acts relevant provisions, are "aiding, abetting, counselling or procuring" their contravention by others.Such persons need not themselves be "in trade" before the Court will have jurisdiction to order that they pay damages as aiding or abetting parties.The provision would clearly be apt to empower the Court to make orders for payment of damages against persons who had made the representations which the Bendalls have been found to have made.

[30] Our finding on the first ground of appeal makes it unnecessary to consider the second.Mr Weston's challenge to the Judge's finding of breaches of s22 of the Fair Trading Act was premised on his succeeding on the first ground.In that event, s22 required separate consideration as it did not incorporate a requirement that the party in breach was "in trade".As we have found that the "in trade" argument under ss9 and 13 fails it is therefore unnecessary to consider that under s22.

Factual findings

[31] In his written submissions in support of the third ground of appeal Mr Weston attacked the findings of fact made by the High Court Judge in relation to breaches of the Fair Trading Act.He acknowledged that the Court does not lightly disturb findings of fact by a trial Judge who has seen and heard all the witnesses, citing the principal judgment of the Court in Rae v International Insurance Brokers (Nelson/Marlborough) Ltd [1998] 3 NZLR 190, 198.There the Court emphasised that an appeal is not the occasion for a general factual retrial.Mr Weston however referred to a number of decisions which indicate that where the reasons given by a trial Judge for findings of fact are not satisfactory, or indicate advantage has not been taken of having seen and heard the witnesses, particular findings may become at large in the appellate court.

[32] Mr Weston went on generally to contend that the Judge had failed to address the content of each representation, or other relevant conduct which had been found to have been in breach of duties, in relation to particular respondents.The Judge was also said to have failed to make findings as to who made the representation in each case and as to whether the breach arose from erroneous factual statements, changing circumstances or through silence in circumstances in which failure to disclose was misleading or deceptive.The Judge finally was said to have failed to identify whether the conduct concerned had occurred prior to or after the individual respondents entered into contracts with OIQL.Mr Weston in his submissions referred to particular incidents by way of illustration of his argument.His general theme was that the Judge had expressed conclusions which lacked an adequate basis in factual findings and she had not addressed the issues by reference to individual plaintiffs and individual defendants.He did not however seek to challenge the Judge's findingsconcerning the credibility of the principal witnesses.

[33] This part of the appeal is accordingly against the Judge's factual findings and the reasoning which led to them.Mr Kohler for the respondents in his argument was critical of the failure of the appellant to put all the material before the Court to enable it to determine the issues.In effect, he said, the appellants' argument was a criticism of the judgment by reference to selected samples of its reasoning, culminating with the submission that there needed to be a fresh trial of all causes of action.Mr Kohler then proceeded to support the Judge's findings, in particular by drawing attention to passages in the evidence which, he argued, contradicted the criticisms of the appellant.

[34] The difficulties of reviewing factual decisions by reference to transcripts of evidence are well known.Counsel constantly remind us of them. As the Court emphasised in Rae an appeal is not the occasion for a fresh trial of questions of fact.But the circumstances of appeals against findings of fact vary considerably and in the end all that an appellant is required to do is to demonstrate that in the applicable circumstances the trial Judge's findings of fact were wrong and should be set aside, sometimes with fresh findings substituted.That is the threshold which must be met.

[35] We are persuaded that because of the issues raised by Mr Weston the Court must itself review the factual findings, express and implicit, and the reasoning of the Judge.It can do so however only by reference to all the relevant evidence on each respondent's individual causes of action where there is a challenge by the Bendalls.We were not given prior to or at the hearing of the appeal sufficient references to the material for us to undertake that task.Accordingly we are unable to take this ground of appeal further at this stage.The position is the same in relation to the fourth ground of appeal which relates to damages.

Disposition of Appeal

[36] We therefore adjourn the appeal for a fresh fixture to be arranged with the Registrar at a time when the present Court can be reconstituted.Counsel for the appellants is to submit in advance written submissions in accordance with the Practice Note which address the particular position of each respondent and also:

[a] Identify with precision the factual findings challenged (whether by inference or otherwise) in relation to that respondent.

[b] Specify the grounds for the challenge in each case.

[c] Identify all portions of the evidence relevant to each challenge.

[37] In turn, counsel for the respondents is to respond with written submissions which:

[a] Are said to support each factual finding challenged.

[b] Identify all relevant portions of the evidence which are said to support each finding challenged or from which inferences may be drawn.

[38] These submissions may be developed at the further oral hearing.

[39] Likewise, in respect of the fourth ground of appeal, the appellants must submit argument in relation to damages that focuses on the position in respect of each respondent concerning whom there is a challenge to the damages awarded, with similar identification of evidence relied upon one way or the other.

[40] Leave is reserved for counsel to apply if any clarification is required in relation to the submissions expected.The costs of the hearing resulting in this interim judgment are reserved to be addressed at the conclusion of the appeal.

Solicitors

Lane Neave, Christchurch, for Appellants

Friedlander & Co, Auckland, for Respondents