Pipeline Enterprises Limited v Rockgas Limited [2014] NZHC 1711 (23 July 2014)

Last Updated: 1 September 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-000621 [2014] NZHC 1711

BETWEEN	PIPELINE ENTERPRISES LIMITED First Plaintiff
	TIMOTHY PHILIP MATHEODA Second Plaintiff
AND	ROCKGAS LIMITED Defendant

Hearing:	21 July 2014
Appearances:	D K Wilson for the Plaintiffs/Respondents A Bloomfield for the Defendant/Applicant
Judgment:	23 July 2014

_{JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

23.07.14 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

PIPELINE ENTERPRISES LIMITED AND T P MATHEODA V ROCKGAS LIMITED [2014] NZHC 1711 [23

July 2014]

Background

[1] The defendant (Rockgas) applies for summary judgment upon the claims of the first plaintiff (PEL) and second plaintiff (Mr Matheoda) in connection with the parties’ business contract arrangements. The contract was dated 12 April 2012 and concerned a Franchise Agreement (the Agreement) granting to PEL exclusive rights to retail LPG on and around Waiheke Island. The Agreement was to subsist for 10 years with two five year rights of renewal. Essentially the Agreement provided for regular payment by PEL for the supply of LPG by Rockgas.

[2] Clause 45 of the Agreement provided for immediate termination of the Agreement if there was a breach by PEL which was not capable of being remedied, or if it was capable of remedy and was breached two or more times in any 12 month period; or if PEL failed to pay any amount 14 days after it becomes due.

[3] The Agreement contained Mr Matheoda’s guarantee of PEL’s obligations.

[4] By the Agreement PEL and Mr Matheoda acknowledged they had sought independent legal advice and accounting advice and that they had not entered into the Agreement in reliance on any representation or warranty made by Rockgas or its officers, employees or agents (clause 37).

[5] PEL and Mr Matheoda pleaded that the Agreement comprised an existing business which had been operating at a significant loss; that it was the intent of the parties that the plaintiffs would work to restructure and develop the existing business to a point where it would become profitable; that representations were made to them by Ms Hannifin of Rockgas to the effect that despite the provisions contained in clause 45 Rockgas would not invoke the right to terminate the Agreement provided the plaintiffs were able to demonstrate that positive progress had been achieved in developing the business towards a profitable entity.

[6] PEL and Mr Matheoda plead they traded at a loss in the period May to November 2012, made a profit in December 2012, made losses for the period January – April 2013, and then made profits in May and June 2013 and that

throughout this period there were regular meetings with Ms Hannifin. However, in July 2013 written notice was delivered dated 15 July 2013 terminating the Agreement.

[7] The plaintiffs have pleaded causes of action including: (a) Misrepresentation inducing contract.

(b) Estoppel by representation.

(c) Misleading and deceptive conduct under s 9 Fair Trading Act 1986 (FTA).

[8] In essence the plaintiffs’ claims focus on representations allegedly made in the course of negotiations that were fundamental to the plaintiffs’ decision to agree to contract with Rockgas. Those representations were pleaded as follows:

2.8 Representations were made to the first and second plaintiffs by Ms Hannafin of the defendant company, to the effect that despite the provisions contained in clause 45.1 of the franchise agreement, Rockgas would not invoke the right to terminate the franchise agreement providing the first and second plaintiffs were able to demonstrate that positive progress had been achieved in developing the business towards a profitable entity.

3.1(i) It was consistently represented to Mr Matheoda and PEL that Rockgas would work collaboratively with PEL and Mr Matheoda in restructuring and developing the business specifically on Waiheke Island to the point where the business became profitable.

3.1(ii) It was further represented to Mr Matheoda and PEL that despite the power which Rockgas had reserved to it in terms of clause 45 of the franchise agreement to terminate the franchise agreement forthwith in the event of a default, restraint would be exercised by Rockgas to enable a reasonable opportunity to PEL and Mr Matheoda to achieve a profit on a monthly basis.

[9] In its statement of defence Rockgas:

(a) Admits that the Rockgas business on Waiheke had been operating at a loss.

(b) Says PEL entered into a deed of lease of the Tahi Road, Ostend, Waiheke premises.

(c) Says it was not a party to that deed of lease.

(d) Says otherwise it has no knowledge of and therefore denies the allegations at the core of the plaintiffs’ claims and involving Ms Hannifin.

[10] To the contrary it says:

(a) There were meetings between PEL and Rockgas throughout.

(b) The plaintiffs were encouraged to reduce operating costs by, as well, securing a sub lessee and reducing staffing costs.

(c) By June 2013 PEL owed Rockgas $71,207.27.

[11] Rockgas’ position is that the parties entered into a written Agreement which contained all of the terms and conditions between the parties and which was consistent with any statements of intention made by Rockgas during the period of non-binding negotiations; and by that they acknowledge they were not entering into the Agreement in reliance on representations made by Rockgas. Further they say the plaintiffs were experienced sophisticated and knowledgeable business people who could be expected to record their respective positions in writing with some care and precision. Also, the parties’ Agreement contained an express acknowledgement of non-reliance upon any representation or warranty.

[12] Nevertheless, Rockgas says it did exercise restraint in exercising its power to terminate.

[13] In a counterclaim Rockgas sues for the amount it says it is owed and seeks judgment also against Mr Matheoda under the terms of his guarantee.

Rockgas’ claim for summary judgment/strike out and summary judgment in respect of its counterclaim, and for security for costs

Summary judgment

[14] In respect of the pleading of the alleged misrepresentations of the plaintiffs, Rockgas asserts, inter alia:

(a) It did not and would never have represented that it would not exercise its right to terminate the Franchise Agreement, regardless of the circumstances, until the franchise became profitable because:

(i) Rockgas was aware that the previous business was not gaining the returns required to justify the operating costs and continued investment at the site.

(ii) It would be commercially absurd to make that promise to allow PEL to operate the franchise at a loss indefinitely, without any foreseeable point in time at which the franchise would turn a profit.

[15] Rockgas says it intended to work collaboratively with the plaintiffs to restructure and develop the business because that was consistent with its obligations under the franchise Agreement. However, Rockgas says it would never represent to work collaboratively indefinitely, in absence of any guarantee that the business would become profitable and the indebtedness cleared. Rockgas says it did work collaboratively for a period of 14 months before the Agreement was terminated.

[16] Rockgas claims PEL and Mr Matheoda are bound by the written terms of their Agreement that the alleged representations are pleaded as statements of future intention whereas any alleged representations would only have reflected Rockgas’ intentions at the time. Regardless Rockgas says it did work collaboratively with the plaintiffs to develop the business, and that they refrained from exercising their power to terminate despite constant breaches.

[17] Rockgas says that even if it had made the alleged misrepresentation to exercise restraint that no reasonable person in the position of the plaintiffs would have relied upon that because it was directly contradicted by their terms of the Agreement. Also it would be commercially absurd for Rockgas to restrain itself from terminating indefinitely if an already unprofitable business continued to be unprofitable.

[18] Regarding the second cause of action, the estoppel by representation cause, Rockgas denies it made any sufficiently clear and unequivocal representation that it would not terminate the Franchise Agreement. It complains the alleged representations are inconsistent, indefinite and insufficiently defined or particularised regarding who made them and when they were made and what exactly was said.

[19] In any event had there been a representation it would not have been relied upon because:

(a) It was a commercial transaction.

(b) Mr Matheoda was an experienced businessman. (c) The plaintiffs received independent legal advice.

(d) The terms of the franchise Agreement contradicted the alleged representation that Rockgas would not terminate the Agreement.

[20] Regarding the third cause of action (FTA misleading and deceptive conduct) Rockgas says it cannot succeed because even if it had made those alleged misrepresentations they are pleaded as promises as to future conduct and in that respect Rockgas has acted consistently (by working with the plaintiffs and offering support and not terminating until there had been continual defaults) showing that any alleged promises as to future conduct were not false, misleading or deceptive.

[21] Rockgas says that on two occasions its solicitors wrote to counsel for the plaintiffs concerning a perceived lack of specifically pleaded representations and

inviting better particularisation of those. Despite this Rockgas says the plaintiffs have failed and/or refused to amend the statement of claim.

Strike out

[22] Rockgas contends no reasonable causes of action are disclosed for the reasons already reviewed, and that therefore the proceeding is an abuse of the Court’s process for it contains only bare assertions of unparticularised oral representations.

Summary judgment on counterclaim

[23] Rockgas says Mr Matheoda is in breach of his guarantor obligations and that there is no fairly arguable defence to the counterclaim.

Security for costs

[24] Rockgas says PEL would be unable to meet costs if it fails, because it is no longer trading and has no known assets. It said a statutory demand was served on Rockgas on 4 November 2013 which expired unremedied. Rockgas says requests for information regarding the plaintiffs’ asset liability and income position, received no response. The defendants believe the sum of $55,000 should be lodged as security.

The case for Rockgas

[25] Ms Hannifin was at the time responsible for managing the Rockgas franchise network and its service station network. Ms Hannifin has filed an affidavit in support of the summary judgment/strike out applications, and an affidavit in reply.

[26] Ms Hannifin deposes that it is through the Rockgas brand that Contact Energy Limited (Contact) supplies bottled LPG; that Rockgas supplies LPG through franchise arrangements. Rockgas Waiheke was established as a franchise operation in August 2002. Contact had operated the site as a branch, as opposed to a franchise, since 2008. By around November 2011 Rockgas had reviewed its decision as to

continuing to operate on Waiheke due to the unsatisfactory return from the business, which was as result of an onerous lease, because of investment costs, and the fact that Rockgas was not interested in engaging in additional income streams for itself. Rockgas was therefore open to the possibility of PEL taking over the branch provided PEL could make certain assurances relating to the profitability of the business and to advance the business in a way that Rockgas had not been able to.

[27] Of concern to Rockgas was that PEL would not be able to meet the rental obligations of the Tahi Road site. Ms Hannifin says that during the period of negotiations she consistently stressed that the rent of the site was too high for the franchise business to be sustained on its own with only revenue from LPG sales. Ms Hannifin says she made it clear that Rockgas would only enter into the Agreement if PEL had a business plan to ensure that it could fulfil its rental obligations with additional income streams.

[28] Mr Gibson of PEL responded and on 6 November 2011 set out his business plan which included subleasing two of the offices to subtenants that he had already found, and from gaining additional income from setting up a frozen meat and chicken distribution centre from the site.

[29] Ms Hannifin said Mr Gibson was a very experienced businessman with good connections on Waiheke Island.

[30] On 7 February 2012 Mr Gibson introduced her to his new business partner, Mr Matheoda. Also at the meeting was Mr Meville, Contact’s franchise developer manager for the northern region.

[31] Ms Hannifin says that thereafter Mr Matheoda became the key contact for

PEL.

[32] Regarding PEL’s claims of representations Ms Hannifin responds that the plaintiffs have not identified any specific instances of those; and that she has no recollection of those or of Mr Melville making them.

[33] Ms Hannifin says Rockgas always intended to work collaboratively with PEL to get the business up and running and to help it reach profitability and that this was consistent with Rockgas’ contractual obligations as franchisor. She does not accept however that Rockgas did nor would represent that it would work collaboratively with PEL for an indefinite period of time regardless of the circumstances. This she said is because it was possible that the franchise would never have become a profitable business.

[34] Ms Hannifin says Rockgas was always aware that the franchise would not generate a sufficient return on LPG sales to cover the ongoing costs at the site; not because it was a difficult market but because of the large cost of the lease at the site and because of maintenance required for the gas tank on the site. That is why she says she would never have represented that Rockgas “would not exercise its power to terminate the Agreement until the franchise became profitable (i.e. an indefinite period of time), regardless of the circumstances”.

[35] Ms Hannifin says that Rockgas’ position was that it would provide support to PEL and assist, where possible, to make the business profitable; that it would not however refrain from exercising its right to terminate the Agreement indefinitely.

[36] Mr Melville has also sworn an affidavit in support of the defendant’s applications. He was present at the meeting on 7 February 2012 with Ms Hannifin, Mr Gibson and Mr Matheoda. He deposes Mr Matheoda was an experienced businessman.

[37] Regarding the claims of representations contained in the statement of claim Mr Melville deposes that PEL and Mr Matheoda did not specify any particular meetings at which Rockgas is alleged to have made these representations. He says however he did not make any of them and nor does he have knowledge of Ms Hannifin making any of those.

[38] Regarding the alleged representations he confirms it was Rockgas’ position that they would collaborate with and provide support to PEL but that they never represented they would continue to do this no matter what the circumstances were.

[39] Mr Melville confirms that it was known the franchise would not succeed unless it was able to reduce its operating costs or obtain supplementary income. As a result assurances were sought from Mr Gibson that he would secure a subtenant or obtain supplementary income before Rockgas would grant the franchise. The purpose of seeking those assurances was to avoid the franchise operating at a loss at all. In any event he said Rockgas exercised restraint in not terminating the Agreement despite the regular failure to make payments on time.

[40] Mr Melville explains how contact was made with PEL in order to try and accommodate their situation by offering payment arrangements.

[41] In February 2013 Mr Melville wrote to Mr Matheoda requesting that he complete and forward a solvency certificate to confirm PEL was solvent. On 7

March 2013 PEL’s accountant replied saying the business was solvent but that current assets were 95 per cent of the current liabilities.

Opposition to Rockgas’ applications

[42] The grounds of opposition include:

(a) The allegations relied upon by Rockgas in relation to the first cause of action are matters of credibility and cannot be determined on the basis of affidavit evidence.

(b) The affidavit evidence discloses that the business of PEL was gradually generating sufficient cashflow to produce a profitable result.

(c) The plaintiffs do not suggest that Rockgas represented it would work collaboratively on an indefinite basis; also that the business had commenced trading profitably at the time the franchise Agreement was terminated.

(d) Rockgas breached the terms of the representations to cooperate with the efforts of the plaintiffs to generate a profitable business.

[43] As to the second cause of action (estoppel by representation) the plaintiffs claim:

(a) The reliability of the respective allegations of the parties will depend

in the Court’s assessment as to credibility of witnesses.

(b) The affidavit evidence establishes the business was capable of a profitable operation.

(c) An experienced businessman would never have entered into an Agreement with Rockgas unless he believed a reasonable opportunity would be afforded to generate a profit from that business on Waiheke Island.

(d) That Rockgas breached representations made to the plaintiffs by inducing them to enter into the original Agreement and then peremptorily terminating that Agreement when profitable performance of the business had just been achieved.

[44] Upon the strike out application the plaintiffs assert that a Court’s assessment

of the credibility of the witnesses will be required.

[45] Upon the counterclaim summary judgment application the plaintiffs claim that the amount sought by the defendants is significantly less than the sum of

$485,000 claimed on behalf of the plaintiffs.

[46] Concerning the security for costs application the plaintiffs say it is not correct that PEL is no longer trading for it has been reconstituted and will recommence trading shortly. Further, PEL says that any impecuniosity on its part is entirely a consequence of the actions of Rockgas in breaching the Franchise Agreement.

[47] In his affidavit Mr Matheoda refutes claims of an absence of representations. He said he would never have entered into the Agreement unless he believed Rockgas was prepared to cooperate in turning around the business which was then consistently making a loss. As for Ms Hannifin’s claims that Rockgas never

intended to work with PEL for an indefinite period of time to obtain a profitable business, Mr Matheoda says that had never been intended and further was not necessary because under his operation the business had improved dramatically and commenced making a profit before the Agreement was terminated.

[48] Mr Matheoda attaches a copy of a report from Mr Koens, PEL’s accountant. That report states that by his business forecast based on the May 2013 balance sheet that the business would be able to be profitable to the tune of $30,000 for the 12 months ended May 2014. Mr Koens states that in his opinion the business had a value of $300,000 and “had management objectives been achieved the business would have been a “little goldmine””.

[49] Mr Gibson deposed that he had initiated contact with Contact regarding the taking over of the Rockgas operation on Waiheke Island. Later he was introduced to Ms Hannifin. He deposed that by the time negotiations became serious and the prices for supply had been established, he had done his research on the opportunity and had discovered the approximate size of the market and where he could have add value to a very badly rundown existing operation.

[50] During his numerous discussions with Ms Hannifin, he was reminded that the rental was too high to sustain the business and was asked to provide a business plan that would show a reduction in rental. He said he did this and at the time he was looking to sublet part of the facility to a food wholesaler although this arrangement fell through. Later he introduced Mr Matheoda, a friend, to the business opportunity. When the business began it wasn’t long, Mr Gibson says, before the business was making a significant inroad into the opposition business. He said by their calculations it would take until year two “to turn a profit”. They continued to seek out a subtenant. Funds were introduced. Mr Gibson believes they were on the right track and that a small profit had actually been achieved after year one. He deposed:

[16] The increase in volumes was very large and we believed we achieved the largest increase in business over the first year than any other franchise of Rockgas in New Zealand but we were never recognised for this achievement.

[51] Regarding Rockgas Mr Gibson deposes:

[19] Their perceived assistance was nothing more than lip service. We knew, as they did, that it was going to be a struggle initially but in the end I believe all they wanted was to terminate their lease and tolerate us until such time as they had to commit to the maintenance programme.

[20] Terminating our contract of supply LPG caused an enormous amount of hardship on the locals who were all relying on our bulk supply facility to supply them with LPG for heating over what was a very cold winter. The elderly were particularly affected.

[52] Mr Koens swore an affidavit confirming the details of his report referred to in an annexure to the affidavit of Mr Matheoda.

[53] Also and on behalf of the plaintiffs a Mr Seaton has sworn an affidavit. He was a director of that company that had traded under the name of Rockgas Waiheke from Tahi Road previously. About 11 years ago Rockgas installed a bulk LPG tank on the site. Rockgas wanted a return on their capital outlay and to achieve this Mr Seaton said they proposed there be a surcharge on the unit cost of LPG until the installation cost had been recovered.

[54] Mr Seaton said that after a period of seven years trading the capital cost of the LPG tank was paid off; that it was his understanding thereafter that the cost per unit of LPG would abate by the amount of the surcharge that had previously been imposed.

[55] Contrary to this, he says the cost of LPG supplied by Rockgas was the highest per unit in the Waiheke Island market.

[56] Later Contact took over the business of Rockgas. Mr Seaton expressed his views regarding his dissatisfaction in dealing with Rockgas and then Contact. He said that when PEL took over the business it was making a loss but Mr Matheoda had succeeded in turning the business around to the position where it started to make a profit. He believes Contact pulled the plug on PEL when the bulk supply tank was up for a 10 year “re-commissioning exercise”.

Rockgas’ reply evidence

[57] Ms Hannifin’s second affidavit replies to the affidavits of Mr Matheoda, Mr Gibson and Mr Koens. She believes the plaintiffs have not made out a valid defence to any of Rockgas’ applications; that most of what the plaintiffs say is about establishing the business and of signs of profitability starting when the Franchise Agreement was terminated.

[58] In Ms Hannifin’s view the question of profitability is not relevant because Rockgas did not terminate the Agreement because PEL was unprofitable. Rather it terminated the Agreement “because of PEL’s consistent and repeated breaches of its contractual obligations, by its repeated failure to pay sums owing to Rockgas in accordance with the terms of the Agreement”.

[59] Ms Hannifin notes PEL has not denied its liability in respect of the amount still owed to Rockgas, and nor has Mr Matheoda denied his personal liability as guarantor.

[60] Regarding the plaintiffs position that the case depends upon an assessment of witness credibility, Ms Hannifin said Rockgas rejects that view. She says the problem is less one of assessing credibility and more simply that there is a complete lack of evidence to support the plaintiffs’ position. She repeats a reported failure or refusal by the plaintiffs to provide details of exactly what is alleged to have been said or in the circumstances in which it was alleged to have been said, or where it is alleged to it have been said. Nevertheless she says Rockgas’ affidavits have remained constant in their response. By contrast however it is claimed the plaintiffs’ affidavits “creates some further ambiguity over the alleged representations”. She perceives claims of representations of quite a different nature in the plaintiffs’ notice of opposition, by comparison to the pleadings contained in the plaintiffs’ statement of claim. She said she was pleased to see the plaintiffs no longer suggested that Rockgas represented it would work collaboratively on an indefinite basis; and no longer claim that Rockgas represented that despite the terms of clause 45 of the Agreement it would not invoke its right to terminate the Agreement provided the

plaintiffs could demonstrate that they have achieved positive progress towards profitability.

[61] These perceptions notwithstanding Ms Hannifin repeats and confirms her denial that she or Rockgas ever made any of the alleged representations and nor were Mr Matheoda and PEL induced to sign the Agreement because of any alleged representations.

[62] Regarding Mr Matheoda’s statement that he would never have entered into the Agreement unless he believed Rockgas were prepared to cooperate in turning around the business, Ms Hannifin reiterates that she does not understand how this is meant to affect Rockgas’ contractual right to terminate the Agreement following PEL’s breaches, or of its right to take action to recover the resulting debts.

[63] Concerning Mr Melville’s affidavit, Ms Hannifin states that in most material respects Mr Melville’s account is consistent with her own memory of the events. She said she told Mr Melville that she “would do all [I] could to support [them] going forward”.

[64] She said she recalled saying at some stage that Rockgas would support them, “that I did not mean financially. I would certainly not have intended my comment to be understood as a promise that Rockgas would support PEL indefinitely until it made the business profitable, regardless of whether or not PEL met its contractual obligations to Rockgas”.

[65] Ms Hannifin says she rejects Mr Gibson’s “various subjective opinions about Contact and Rockgas’ intentions and motives in entering into and subsequently terminating the Agreement”. She says they are unfounded and irrelevant.

Considerations

[66] Rockgas’ position is it did not provide the representations. It complains claims of misrepresentations are vague, unspecified and unparticularised as to content or when it is said they occurred.

[67] Rockgas’ primary position is it is entitled to rely on the parties’ written contract by which the plaintiffs acknowledged there was no reliance on representations made by Rockgas. Therefore even if the representations were made or may be capable of proof those cannot be advanced in their cause because they are contrary to the written agreement concluded after the said representations were made.

[68] Pre-contract, Rockgas had encouraged the plaintiffs to secure a sub-tenant to assist with payment of lease costs, the impact of which could determine the success or failure of the franchise business being sold to the plaintiffs.

[69] The plaintiffs including Mr Gibson were experienced businessmen. They knew of the business difficulties they would encounter. The lack of a subtenant may have impacted on the viability of the business purchase.

[70] The plaintiffs’ first cause of action of misrepresentation inducing a contract appears to be a claim under s 6 of the Contractual Remedies Act 1979 (CRA). Under s 4(1)(c) of that Act a Court is not precluded by any provision purporting to preclude a Court from enquiring whether any representation was relied on unless the Court considers it is fair and reasonable the provision should be conclusive having regard to all the circumstances of the case, including if, as is here, the parties were receiving legal advice.

[71] The plaintiffs’ position is that the representation was that Rockgas would not terminate the Agreement until the plaintiffs had been given a sufficient opportunity to become profitable. In Rockgas’ view this amounts to a claim that it would work collaboratively with the plaintiffs on an indefinite basis.

[72] Certainly if that was said or done by Rockgas then for the plaintiffs to succeed Rockgas must have intended those words to induce entry into the contract on the basis of it or that they wilfully used language that would have induced a

normal person to enter into the contract.¹ Any representation will not be actionable if no reasonable person in the position of the plaintiffs would have relied upon it.²

[73] Rockgas’ position is that neither Ms Hannifin nor Mr Melville made those alleged representations. Each, is clear they did not. Ms Bloomfield submits it is highly improbable that they would have represented that Rockgas would refrain from terminating the Agreement, “regardless of any circumstances that arose, given that Rockgas was aware the business could not cover the site’s high rent”.

[74] In any event, Ms Bloomfield submits, the alleged representations are expressed as statements of future intention. Moreover the clear evidence is, she submits, that Rockgas worked collaboratively with the plaintiffs and refrained from terminating the Agreement despite, Rockgas says, repeated breaches by PEL of its contractual obligations.

[75] Ms Bloomfield submits that even if the alleged representations were made and even if they were untrue, that no reasonable person in the plaintiffs’ position would have signed the Agreement in reliance upon those because the Agreement did not record and indeed significantly contradicted them; it was a commercial transaction involving experienced businessmen; that it would have been commercially absurd for Rockgas to restrain itself from terminating the Agreement in the manner it did.

[76] As to the plaintiff’s claims of estoppel by representation Ms Bloomfield submits the reliance on a non-contractual representation will only be reasonable if that representation was clear and unequivocal – features she says are absent in this case.

[77] This was a commercial transaction, reduced to writing. In this case the plaintiffs have a significant responsibility if they are to prove that what was said and

_{that which they have claimed were sufficiently unambiguous representations.}

¹ _{Savill v NZI Finance Limited (1990) 3 NZLR 135, at 145.}

² Vining Realty Group Limited v Morehouse [2010] NZCA 104; (2010) 11 NZ CPR 879, at [46].

[78] Rockgas’ position is that it would not be unconscionable to allow them to resile from the alleged representations because the contract terms preclude consideration of those representations. Also Rockgas conducted its relationship with the plaintiffs consistently with the alleged representations for 14 months and in the end acted as they did and as they only could because of the plaintiffs’ failure to pay their debts as they fell due.

[79] Regarding the plaintiffs’ third cause of action i.e. misleading and deceptive conduct under s 9 of the FTA it is clear the Court must consider objectively the conduct complained of including whether it was capable of being misleading and whether it was reasonable for the plaintiffs to claim they were misled.

[80] Ms Bloomfield submits that a representation as to intended future conduct is not generally a representation of fact for the purposes of the FTA, and is not misleading or deceptive merely because the future conduct does not come to pass.

[81] In this case the conduct that is pleaded to be misleading and deceptive was the making of the alleged representations. Ms Bloomfield submits this claim must fail because the plaintiffs’ evidence does not describe the representations with clarity or the circumstances in which they are supposed to have been made.

[82] Ms Bloomfield also submits that if the alleged representations were made then at best they reflected Rockgas’ true intentions at the time and therefore it cannot reasonably be said that they were untrue, without substance, misleading or deceptive; but even if the plaintiffs were misled by the alleged representation, it was not reasonable for them to have been so misled because Mr Matheoda was an experienced businessman who failed to have recorded those representations he now claims were made. Indeed, he signed an Agreement which directly contradicted any such representations, and after taking independent advice.

[83] In summary it is the position of Rockgas that none of the causes of action can succeed, and because Rockgas has a complete defence that cannot be contradicted. Therefore even if the Court has reservations about the grant of summary judgment, it should in any event strike out all causes of action.

Conclusions

[84] In the absence of hearing the viva voce evidence of the parties concerned, the Court retains reservations of Rockgas’ claims about the content or the quality of the evidence of Mr Matheoda and Mr Gibson. Notwithstanding the parties’ written Agreement s 6 of the CEA may provide an avenue for challenging Rockgas’ actions in terminating the Agreement.

[85] Mr Matheoda and Mr Gibson were experienced businessmen who believed the business could operate profitably knowing that likely other income sources would be required to achieve profitability.

[86] It seems clear Rockgas knew or must have known the business would take some time before it could pay its debts. Certainly there was a clear perception the plaintiffs would not be profitable from the beginning. Rockgas was aware of that for the evidence suggests they had the means to monitor progress towards profitability. Indeed financial reports were forwarded to Rockgas regularly. Unfortunately, and apparently with little warning, Rockgas terminated the Agreement at a time when the plaintiffs’ evidence suggests the business was starting to trade profitably.

[87] The plaintiffs say there were representations which they relied on which the plaintiffs says were untrue and have caused them loss.

[88] As appears from the representations of counsel that although they are referred to as representations, their legal nature may vary depending on the causes of action. As they are pleaded, they offer alternative claims of estoppel by representation, and misleading and deceptive conduct.

[89] Rockgas contends the allegations are insufficiently particularised. The Court does not agree. As Mr Wilson submits, the allegations are brief, and appear straightforward and clear. There can be no doubt as pleaded, the alleged representations sufficiently inform Rockgas of the case it confronts.

[90] There is no disagreement that prior to the parties’ contract Rockgas had operated the Waiheke business; that it traded as a loss; and Rockgas knew that a franchise would not succeed unless it was able to reduce operating costs or obtain supplementary income.

[91] Clearly there is a degree of generality in the wording of the alleged representation; that it comes from the use of terms ‘work collaboratively’, ‘positive progress’, ‘restraint... to enable a reasonable opportunity... to achieve a profit on a monthly basis’.

[92] Clearly both parties were concerned about what had to be done to change the venture from a loss into a successful position. Both parties needed to, and did address the question of how long that would take.

[93] There were negotiations. That meeting on 7 February 2012 was important. Ms Hannifin said she has no recollection of making any representations. Mr Melville says he made none. However, they acknowledged a willingness to work collaboratively with and to support PEL. Exactly what was meant by that is a matter of determination at trial.

[94] The plaintiffs say that because of the assurances given they worked hard to turn the business around and were succeeding until Rockgas terminated its agreement.

[95] Rockgas justified this determination because of the debt that was then owed because of repeated failure to make payments due.

[96] Mr Melville observes that Rockgas never represented they would continue to provide collaboration or support no matter what the circumstances were. But, it is clear the plaintiffs did not expect a guarantee; that their case concerns Rockgas closing the business down while the plaintiffs were making reasonable progress with it to achieve monthly profitability.

[97] Rockgas claims any representations were inconsistent with communications at the time of termination. The Court does not agree. There is evidence of emails as to the growth of sales and profitability in the first 14 months indicating significant business achievement.

[98] Mr Wilson acknowledges that the alleged representations have an element of future intention about them, rather than being a statement of existing or past fact. As he observes however that does not prevent those being actionable. Also in relation to the plaintiffs’ claims of estoppel and lack of fair trading those representation statements arguably can be seen in the nature of promises which the defendant partly performed, then stopped.

[99] The plaintiff complains about the inconsistency between the representations and the written contract. To the Court at this time suggests the need for further enquiry into the nature of the parties’ negotiations. In that respect if appears to be common ground that by their agreement Rockgas or Contract was relieved of any ongoing lease obligations.

Conclusions

[100] Notwithstanding the alleged misrepresentations have an element of future intention it is for the Court at trial to determine what representations if any were made. For present purposes the Court is to assume that the allegations contained in the statement of claim can be proved. Rockgas asserts it has a strong defence. That may be so but in the Court’s view the claim needs to be tested by a trial. It is not appropriate for the Court to consider the claim cannot succeed, or as Rockgas suggest, that it is an abuse of process.

[101] If the claim of estoppel is to succeed then it is because Rockgas played a role in the adoption of the expectation that the plaintiffs would have a reasonable opportunity to prove the viability of the business, and that it would now be unconscionable for Rockgas to resile from that position. The reasonableness of the plaintiffs holding that expectation and reliance upon it are evidential matters for

examination at trial and the Court is not prepared to accept it is proper for Rockgas to assert at this stage that there is a lack of reasonableness involved.

[102] Of course the Court must be cautious before considering finding that the terms of a written agreement do not prevail even when the parties acknowledge it contains there whole agreement. In appropriate circumstances the Court can accept there may be another intervening cause that changed the commercial expectations of the parties’ written agreement.

[103] It follows that any liability of PEL or Mr Matheoda upon Rockgas’

counterclaim should await determination of the plaintiffs’ claims.

[104] The Court may refuse or defer from making an order for security for costs in circumstances where a plaintiffs’ impecuniousity has been caused by the defendant. In the Court’s view that is a matter for determination in due course.

[105] In adopting this view of matters the Court does not preclude a claim for security at a later stage such as when the matter is to be set down for trial. At this time the Court is not prepared to make an order for security.

Result

[106] Rockgas’ applications are refused.

_{[107] Costs are reserved for determination in the resolution of the plaintiffs’ claims.}

Associate Judge Christiansen