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Last Updated: 17 March 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2013-404-004456 [2014] NZHC 136
BETWEEN INTERNATIONAL NEW ZEALAND TRADING LIMITED
Plaintiff
AND LEYDA WOOD First Defendant
FRESH FRUIT TRADING LIMITED Second Defendant
Hearing: 12 February 2014
Appearances: J A R Cox for plaintiff
S J Christmas for first defendant
Judgment: 13 February 2014
JUDGMENT OF ASSOCIATE JUDGE ABBOTT
This judgment was delivered by me on 13 February 2014 at 11am, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors:
Blomkamp Cox Solicitors, Takapuna, Auckland
Lawler & Co Ltd, Meadowbank, Auckland
INTERNATIONAL NEW ZEALAND TRADING LIMITED v WOOD [2014] NZHC 136 [13 February
2014]
[1] This proceeding concerns an agreement for the supply of bananas
grown in the Philippines. The defendants have contact with
growers in the
Philippines, and procured the supply to the plaintiff (International Trading),
who intended to sell them in Iraq.
[2] The shipments were inspected on arrival in Iraq and found not to be
of the required quality. An expert reported to International
Trading that they
suffered from disease. International Trading has sued both defendants for
breach of contract, breach of the Fair
Trading Act 1986, breach of the Sale of
Goods Act 1908 and for fraud.
[3] The first defendant (Mrs Wood), a director and shareholder of the
second defendant (Fresh Fruit Trading), has applied for
summary judgment against
International Trading, contending that International Trading cannot establish
that she is a party to the
supply agreement or otherwise personally
liable.
[4] For the reasons I will now give, I find that the central question
as to whether the Mrs Wood is a party to the supply agreement
cannot be
determined summarily, but will have to be determined at trial.
Background
[5] Mrs Wood is from the Philippines, but has lived in New
Zealand for a number of years. Her family owns a banana
farm in the
Philippines. In 2012 Mrs Wood and her husband incorporated Fresh Fruit Trading
for the purpose of pursuing a business
procuring bananas in the Philippines for
export. Although both Mrs Wood and her husband are directors, Mrs Wood took the
major operational
role in the business, and uses the title of managing director.
Fresh Fruit Trading set up a website to market its business.
[6] International Trading is an importer and exporter of goods based in
New
Zealand. It identified a potential market for bananas in Iraq.
[7] In May 2012 Mr Ahmed Raad Ali, a director of International
Trading, contacted the defendants, through Fresh Fruit
Trading’s website,
about supplying bananas for export to Iraq. A sample shipment was arranged
which proved satisfactory.
[8] In May 2012 Mr Ali and Mrs Wood signed a written agreement for
supply (24 August 2012), based on the sample shipment and
specifications as to
quality set out in the agreement.
[9] Mrs Wood went to the Philippines and sourced bananas for supply in
terms of the agreement. They were shipped from the Philippines
to Iraq, but on
arrival were found to be of poor quality and not merchantable.
The claim
[10] International Trading commenced this proceeding on 11 October
2013 alleging that both Mrs Wood and Fresh Fruit Trading
are liable under eight
causes of action:
(a) a failure to supply bananas of the agreed quality, in breach of
contract
(the first cause of action);
(b) misleading and deceptive conduct in the form of representations as to the quality of bananas to be supplied in breach of the Fair Trading Act
1986 (the second and third causes of action, being separate claims under s 9
and s 10 of that Act);
(c) supply of bananas that did not correspond to description, that were not reasonably fit for purpose (resale and consumption in Iraq), were not of merchantable quality, and did not comply with trade quality or fitness, all in breach of the Sale of Goods Act 1908 (the fourth to seventh causes of action, brought under separate provisions of that Act); and
(d) deliberately and fraudulently supplying sample bananas that
differed substantially from the bananas subsequently supplied,
with a view to
inducing International Trading to enter into the supply agreement.
[11] The defendants admit that Fresh Fruit Trading entered into an
agreement for supply, and that bananas were supplied pursuant
to that agreement,
but say that all bananas were satisfactory when shipped. They deny liability
under all causes of action. They
also counter-claim for the unpaid balance of
bananas already supplied, and for International Trading’s failure to
continue
to order bananas, allegedly in breach of the supply
agreement.
The application for summary judgment
[12] At the same time as filing the defence and counter-claim, Mrs Wood
applied for summary judgment. The essential ground is
that International
Trading cannot establish that she is personally liable. She says that at all
times she was acting as director
and representative of Fresh Fruit Trading. In
particular, she says that on the evidence before the Court:
(a) she is not a party to the supply agreement; and
(b) any representations as to the quality of the bananas were made as a
representative of Fresh Fruit Trading.
[13] She relies on the fact that International Trading (acting through
Mr Ali) initially made contact with Fresh Fruit Trading
through its website, and
contends that the agreement, read as a whole, makes it clear that the
contracting parties were International
Trading and Fresh Fruit Trading only.
She says that this position is supported by the fact that in all her
correspondence she is
shown as “Managing Director, Fresh Fruit Trading
Ltd”.
[14] International Trading opposes the application on the grounds that Mrs Wood has not shown that its causes of action cannot succeed. In particular, it relies on the description of the parties in the supply agreement, where Mrs Wood is specifically
named, and the evidence of Mr Ali that her name was added specifically at his
request “to guarantee” performance
of obligations under
the agreement. International Trading accepts that Mrs Wood disputes Mr
Ali’s evidence, but says
that this dispute cannot be resolved
summarily.
[15] The critical issue that the differing contentions raise is whether
Mrs Wood has shown that International Trading Ltd’s
contention that she is
a party to the supply agreement cannot succeed. If so, she must also satisfy
the Court that International
Trading cannot establish an arguable case that she
has personal liability for representations made as to the quality of the
bananas,
and that there is no arguable basis for contending that she
deliberately misled International Trading as to the quality of the bananas
to be
supplied.
Applicable legal principles
[16] Mrs Wood brings her application under r 12.2(2) of the High Court
Rules:
(2) The court may give judgment against a plaintiff if the defendant
satisfies the court that none of the causes of action
in the plaintiff's
statement of claim can succeed.
[17] The principles that the Court applies when determining a
defendant’s application for summary judgment are
to be found in the
decision of the Court of Appeal in Westpac Banking Corporation v M M Kembla
New Zealand Ltd.1 For the purposes of the present application,
the following principles are relevant:
(a) The defendant, applying for summary judgment, has the onus
of proving on the balance of probabilities that the
plaintiff cannot
succeed.
(b) Summary judgment will be inappropriate whether there are disputed issues of material facts, or where material facts need to be ascertained
by the Court and cannot be confidently concluded from affidavits,
or
1 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298; (2000) 14
PRNZ 631, particularly at [58] – [64].
where ultimate determination requires a judgment which can only properly be
arrived at after a full hearing of the evidence.
Is it arguable that Mrs Wood is a party to the supply
agreement?
[18] The starting point for assessing this central issue is the written
agreement of
24 August 2012. Before examining its terms, it is important to set out the
genesis of the written document. Mrs Wood says in her
evidence in support of
her application that with the exception of the description of the parties, the
agreement was prepared by Fresh
Fruit Trading’s accountant, based on
information that she (Mrs Wood) supplied. It is common ground that Mrs Wood
then added
the description of the parties to the first page of the
agreement.
[19] The agreement is a seven page document. The first page is printed
on Fresh Fruit Trading’s letterhead, and is
headed “BANANA
SALE AND PURCHASE AGREEMENT”. That first page contains a description of
the parties, some background
in the form of recitals, and then the operative
clause:
1. SELLER shall sell exclusively to BUYER, and BUYER shall buy, all
the export grade Cavendish bananas produced from the farms
of the GROWERS which
satisfy the quality specifications of BUYER as set forth in Annexes A-1 Supply
Agreement.
[20] The next five pages of the agreement are headed “ANNEXEURE
[sic] A-1
Supply Agreement”. This annexure sets out the quantities, prices and
specifications for the two classes of bananas to be supplied,
payment terms, the
parties’ responsibilities, the term of the agreement and an arbitration
clause. The seventh page is
headed “ANNEXURE-B-1 CLAIMS
PROCEDURE” and at the foot provides for signature by
“International Trading
NZ Ltd (Ahmed Ali)” and “Fresh Fruit
Trading Ltd (Leyda Wood)”.
[21] The opening words of the agreement, containing the
description of the parties, are central to the determination
of this
application:
This agreement is made and executed on the date and place hereinafter written by and between:
Leyda Wood, New Zealand, of legal [sic] and residing at 129/A Reeves Road,
Pakuranga Auckland hereinafter referred to as FRESH FRUIT
TRADING LIMITED a
Limited Liability company duly organised under the law of New Zealand, with
business address 129/A Reeves Road,
Pakuranga, Auckland New Zealand, represented
by its Managing Director Leyda Wood hereinafter referred to as
“SELLER”;
of Banana.
And
INTERNATIONAL NEW ZEALAND TRADING LIMITED, a corporation duly organised under
the laws of New Zealand, with business address at 5,
Sheldon Place, Burswood
Auckland, represented by its Manager Ahmed Raad Ali hereinafter referred as
“BUYER”
[22] Counsel for International Trading submitted that its primary
contention is that Mrs Wood, whose name first appears, is the
person identified
as the seller, and the reference to Fresh Fruit Trading was no more than an
alter-ego for her, for the purposes
of drafting. He submitted, in the
alternative, that it is at least arguable, on this wording, that Mrs Wood is a
party to the agreement.
[23] Counsel pointed to Mr Ali’s evidence:2
Before we signed the contract, Ms Wood confirmed herself as personal
guarantor. This is why her name and the company name
was placed in the
contract.
[24] Counsel noted that Mrs Wood had inserted this description, and
argued that the inclusion of the curious phrase “of
legal” was meant
to refer to her legal capacity, indicating her personal liability. He submitted
that these were lay people
completing the agreement, and Mr Ali’s evidence
could be taken as indicating that Mrs Wood was to be a party, whether it was
technically as a principal or as guarantor.
[25] Counsel for Mrs Wood accepted that Mrs Wood appeared to have been named as a party, but says that this was merely a consequence of her naivety in drafting, and that when the description of “SELLER” was read as a whole it was clear that Fresh Fruit Trading was the party and Mrs Wood was merely being identified as the representative of the company. She relied on the opening words of annexure A1,
under the heading “Supply
Agreement”:
2 Paragraph 14, affidavit affirmed 9 September 2013.
FRESH FRUIT TRADING LTD A company duly organized and existing under the New
Zealand laws with office address at 129A Reeves Road,
Pakuranga, Auckland, New
Zealand, herein represented by Leyda Wood, Managing Director, herein referred to
as SELLER.
Counsel also relied on the fact that all payments were to be made to Fresh
Fruit Trading’s account and to the signature provision
which indicated
that Mrs Wood was signing for Fresh Fruit Trading rather than on her personal
account.
[26] The description of the seller regrettably is unhappily drafted. The
placement of Mrs Wood’s name at the start of the
paragraph can be
contrasted with the description of “BUYER”, where International
Trading’s name appears first and
the phrase “represented by its
Manager Ahmed Raad Ali” follows. Counsel for Mrs Wood’s submission
that this was
simply a matter of naivety in drafting has some support in the
rest of the agreement, but the other terms do not dispel the ambiguity
present
in the description of seller. There is further support for
International Trading’s case in the fact that
Mrs Wood inserted this
description herself (so that it must be construed contra preferentum) and
following discussions (although there is dispute over this) before the agreement
was signed.
[27] Mrs Wood says in evidence that she had no discussion with Mr Ali
about being a party or guarantor. I am unable
to resolve the
dispute on that point. However, the submission of counsel for Mrs Wood that
the true position lies in the reference
to International Trading as the seller
at the start of annexure 1, and the lack of separate signature for Mrs Wood in
her personal
capacity, does not have the same force when one takes into account
that those parts of the agreement were drafted ahead of time,
as distinct from
the description of parties being added at the point of signature.
[28] Mrs Wood has not been able to give a persuasive explanation for her name being inserted at the start of the description of seller. Whether the parties intended that she was to be added as a party (as Mr Ali contends, applying a layman’s meaning when he referred to “guarantor”) is a matter for trial, as is the dispute between the parties as to whether this occurred. I do not find the way that Mrs Wood
signed off her correspondence (as managing director of Fresh Fruit Trading)
assists me on the fundamental point of construction of
the
agreement.
Other causes of action
[29] I find that Mrs Wood has not discharged her onus of
showing that International Trading’s contention that
she was a party to
the supply agreement cannot succeed. On that basis the claim for summary
judgment must be dismissed.
[30] In light of my finding on the contract point, and having regard to
the requirement for Mrs Wood to show that none of the causes
of action can
succeed, I do not need to spend any time on the other causes of action. I
merely comment that the finding I have just
made leaves open the claims under
the Sale of Goods Act, and may well have a bearing on the claims that she
assumed personal liability
for the representations underlying the Fair Trading
Act claims. However, I will address briefly the claim of fraud.
[31] I am not persuaded that there is a tenable cause of action in fraud,
based on the evidence before the Court. This cause
of action is lacking in
proper particulars. At the very least I would expect there to be a pleading of
direct involvement in the
supply and, of greater significance, knowledge on Mrs
Wood’s part of the inferior quality of the bananas.
[32] Counsel for International Trading acknowledged that the claim is
currently lacking particulars. He sought to support the
cause of action on the
basis of evidence of the expert who inspected the shipment in Iraq that the
bananas were diseased, and that
this disease pre-dated the shipment. This is
“drawing a very long bow” on the basis of the assessor’s
report,
but significantly does not establish a case for Mrs Wood’s
knowledge. There was no direct evidence as to when the disease would
have been
apparent, and no evidence that either defendant was sufficiently aware of it to
allow an inference of knowledge to be drawn.
[33] I would have ordered summary judgment on that cause of action if permitted by the rules to do so.
Decision
[34] Mrs Wood’s application for summary judgment is
dismissed.
[35] Counsel are agreed that costs should be reserved pending
determination of the substantive dispute.3
[36] The Registrar is to allocate a case management conference as soon as
time is available. Memoranda are to be filed no later
than two working days
beforehand addressing:
(a) Any amendment of pleadings as a consequence of this decision. (b) Directions sought in relation to discovery.
(c) A timetable for all interlocutory steps.
(d) Time required for trial, and proposals for pre-trial
directions.
Associate Judge Abbott
3 NZI Bank Ltd v Philpott [1990] 2 NZLR 403; (1990) 3 PRNZ 695.
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