Dieulangard v Dyson [2016] NZHC 346 (4 March 2016)

Last Updated: 30 May 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-373 [2016] NZHC 346

BETWEEN	PASCAL DIEULANGARD Plaintiff
AND	JEREMY VERNON DYSON First Defendant NELLY MICHELLE SYLVIE DYSON Second Defendant

Hearing:	4 February 2016
Appearances:	G Bogiatto for the Plaintiff Defendants in person (part hearing)
Judgment:	4 March 2016

_{JUDGMENT OF MUIR J}

This judgment was delivered by me on Friday 4 March 2016 at 10.00 pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:...............................

Solicitors:

G Bogiatto, Auckland

_{Copy to the Defendants.}

DIEULANGARD v DYSON [2016] NZHC 346 [4 March 2016]

Introduction

[1] The plaintiff, Mr Dieulangard, seeks damages/compensation for lost investment monies totalling $259,000. He says that due to misleading and false representations he invested his savings with the defendants, Mr and Mrs Dyson. He says the Dysons told him that he would be part owner of a land holding in Helensville, Auckland (the property) and co-investor in the development of the property into an apartment and lifestyle complex. Neither purchase of the property nor the development proceeded.

[2] He also seeks recovery of an additional sum of $100,000 which he says was advanced to the Dysons by way of loan but never repaid.

[3] The case proceeded by way of a formal proof as the defendants had hitherto failed to engage with the Court process.¹ On the date of the formal proof hearing they attended Court. I advised them that if they wished to defend the claim at that point they needed to seek the leave of the Court to do so. I adjourned while they conferred and sought advice. On their return they advised that they did not intend to participate further. They then left the court.

[4] I therefore proceed to consider the merits of Mr Dieulangard’s claim on his

formal proof application.

Background

[5] Mr Dieulangard is a French osteopath who resides in New Zealand periodically. While in New Zealand he befriended the Dysons, a married couple who were in the business of property management and development. The Dysons were initially his patients and Mrs Dyson was French, providing an additional connection. Mr Dieulangard often stayed with the couple while in New Zealand.

[6] From the outset Mrs Dyson was involved in the commercial aspects of their relationship, frequently talking to Mr Dieulangard in French about the property and

_{the development which was intended for it.}

¹ High Court Rules, r 15.9.

[7] In May Mr Dieulangard informally joined Mr and Mrs Dyson in partnership. The purpose of the partnership related initially to acquisition of the property. At the Dysons’ request Mr Dieulangard made a payment of $91,000 towards what he describes as “completing the purchase of the land”. There does not appear to have been any discussion as to how the balance of what was to be an approximately

$3 million purchase price was to be funded. Mr Dieulangard appears to have so trusted the Dysons and been so naïve in business matters that he was not on inquiry in this regard.

[8] In early 2008 Mr Dieulangard returned to New Zealand and lived with the Dysons for several weeks. Together the Dysons lead Mr Dieulangard to believe that the purchase of the land had been completed and that he was a co-owner of it.

[9] The Dysons then persuaded Mr Dieulangard to invest in the development of the land – a project styled the “Kaipara Mill Project.” Mr Dieulangard was shown various plans illustrating the proposed development, which was intended to be a three level apartment complex. Mr Dieulangard invested $60,000 in the development in 2008.

[10] Mr Dieulangard returned to New Zealand in early March 2009 and again stayed with the Dysons. During the period from March – November 2009 further investments were made, totalling $208,000. Mr Dieulangard was shown architectural drawings, brochures and plans. He also went to visit the site of the development during which, he deposes, the Dysons at all times acted as though they and Mr Dieulangard owned the land.

[11] Mr Dyson wrote a letter to Immigration New Zealand in support of Mr Dieulangard’s application for a work visa stating that “Mr Dieulangard is my principal partner in [the Kaipara Mill Project].” The letter further stated that Mr Dieulangard has invested a sum “in excess of $250,000” in the project, which was expected to be the first of many for the developers. The letter was dated 20 July

2009. Mrs Dyson wrote a letter to similar effect on the same day.

[12] On 23 June 2009 a further sum was paid to the Dysons but of a different character, being a one-off $100,000 loan at 12 per cent interest per annum. This was sought by the Dysons to assist with short term cash flow requirements. The loan was not recorded in writing, but it was witnessed by Mr Dieulangard’s partner Dagmar Franke. Ms Franke deposes that she recalls the loan conversation. She says Mr Dieulangard was initially reluctant to part with such a large sum but that he was ultimately persuaded to do so on the basis of assurances that it would be repaid in the near future from other imminent sources.

[13] In mid-2010 Mr Dieulangard became aware through Ms Franke that the project had apparently stalled due to the global financial crisis and he confirmed this over the phone with Mrs Dyson. In December 2011 he returned to New Zealand where this advice was repeated.

[14] In October 2012 Mr Dieulangard asked for his investment to be returned and the Dysons agreed to repay him as soon as possible.

[15] In January 2014 Mr Dieulangard again returned to New Zealand where he was told by Mrs Dyson that the project had in fact been “la Berezina” – or a total write off – and that his investment had been lost.

[16] Mr Dieulangard insisted on a meeting on 13 May 2014 at the Dyson’s home during which he demanded the return of his money. He deposes that there were allegedly threats and abusive comments made towards him and that he left the property feeling unsafe. A few days later Mrs Dyson acknowledged responsibility for the debt and agreed to sign an acknowledgement of it. However, Mr Dieulangard said he had lost confidence in the couple and began investigations. At that point he discovered that all of Mr Dyson’s companies had been put into liquidation. His several calls for a proper accounting went unanswered.

[17] In August 2014 Mr Dieulangard then consulted a solicitor and discovered that the Dysons had never owned the property. In fact, although there had been a number of conditional agreements, there had never been any money paid by the Dysons towards its purchase.

The pleadings

[18] Mr Dieulangard pleaded against both Mr and Mrs Dyson:

(a) breach of s 9 of the Fair Trading Act 1986 (FTA); and

(b) breach of an oral agreement to loan $100,000. [19] Mr Dieulangard also pleaded against Mr Dyson only:

(a) breach of fiduciary duty; and

(b) negligent misstatement.

Limitation issues

[20] At first blush Mr Dieulangard’s claim appears to raise FTA limitation issues, as some of the alleged breaches date back to May 2007. Ultimately, however, I do not consider that this precludes the entry of judgment. My reasons are twofold:

(a) the limitation period operates as an affirmative defence that was not pleaded in this case; and

(b) in any event Mr Dieulangard can satisfy the objective threshold in s 43A.

[21] Tipping J addressed the nature of s 43(5), the predecessor to s 43A in AMP Finance NZ Ltd v Heaven in the following terms:²

Section 43(1) creates the right to claim relief. Section 43(5) does not take away that right, it simply prescribes a time period for enforcing it. Conventional limitation provisions use words such as “action shall not be brought after”. Even against that type of wording (e.g. s 4 of the Limitation Act 1950), the right is regarded as still subsisting. The words of s 43(5) are permissive, not prohibitory. Logically, the position under that provision should be stronger for the survival of the right than when the words are prohibitory. ... Section 43(5) provides a limitation defence which must be pleaded. It if is not pleaded a defendant cannot rely on the time point.

² AMP Finance NZ Ltd v Heaven CA151/97, 11 December 1997 at 6.

[22] In this case no statement of defence has been filed and limitation may, in my view, therefore be disregarded.

[23] In any event, I consider that Mr Dieulangard can satisfy the limitation period in the FTA. Section 43A provides:

43A Application for order under section 43

A person may apply to a court or a Disputes Tribunal for an order under section 43 at any time within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.

[24] Mr Dieulangard deposes that the defendants’ misleading and deceptive conduct was not discovered until May 2014 when, on the basis of legal advice, he discovered that the property had never actually been acquired by the Dysons or the partnership. However, in my view the discovery of his loss is better fixed at the date in January 2014 when he was told the prospect was “la Berezina”. The issue is whether Mr Dieulangard ought to have reasonably discovered the loss earlier than January 2014. The text is a contextual one based on a consideration of “how a person carrying on business of the relevant kind would act if he had adequate but not unlimited staff resources and was motivated by a reasonable, but not excessive, sense

of urgency.”³ In Mr Dieulangard’s case the context is one of a medical professional

and putative investor who put his trust in a long term friendship. I consider that there were sufficient indicia of reliability that a reasonable person in Mr Dieulangard’s position would not have taken steps to investigate the title until he/she was put on notice by the events of 2014.

[25] With regard to the breach of fiduciary duty claim and the negligent misstatement claim, the burden to plead the Limitation Act 1950 also rests on the

_defendants.⁴

³ Paragon Finance Plc v DB Thakerar & Co (a firm) [1998] EWCA Civ 1249; [1999] 1 All ER 400 (CA), approved by

_{Baragwanath J in Carter Holt Harvey Ltd v Commerce Commission [2008] NZHC 1744; [2009] NZLR 535 (CA).}

⁴ Matai Industries Ltd v Jensen [1988] NZHC 205; [1989] 1 NZLR 525 at 532; Barberry Holdings Ltd v Bank of New

Zealand HC Wellington CP257/90, 28 July 1993.

The Fair Trading Act cause of action

[26] Mr Dieulangard alleges that the Dyson’s conduct was misleading and

deceptive and in breach of s 9 of the FTA. That section is in familiar terms:

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.

[27] He seeks compensation from both Mr and Mrs Dyson for their allegedly misleading conduct. He does so under s 43 of the FTA which provides in relevant part:

43 Other orders

(1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute –

(a) A contravention of any of the provisions of Parts 1 to 4 of this Act;

...

The Court may (whether or not it grants an injunction or makes any other order under this Part of this Act) make all or any of the orders referred to in subsection (2) of this section.

(2) For the purposes of subsection (1) of this section, the Court may make the following orders –

...

(d) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section to pay to the person who suffered the loss or damage the amount of the loss or damage:

...

[28] I find that the parties were in trade for the purposes of the FTA, as they had formed a partnership first for the acquisition of land and second for the commercial

_{development of that land.}⁵

⁵ Fair Trading Act, s 2(1).

[29] The Supreme Court in Red Eagle Corporation v Ellis held that the appropriate methodology for a Court to follow in a case such as this is twofold:⁶

[28] It is, to begin with, necessary to decide whether the claimant has proved a breach of s 9. That section is directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances... The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established. ...

[29] Then, with breach proved and moving to s 43, the court must look to see whether it is proved that the claimant has suffered loss or damage “by” the conduct of the defendant. The court must first ask itself whether the particular claimant was actually misled or deceived by the defendant’s conduct. ... If the court takes the view, usually by drawing an inference from the evidence as a whole, that the claimant was indeed misled or deceived, it needs then to ask whether the defendant’s conduct in breach of s 9 was an operating cause of the claimant’s loss or damage. ... The impugned conduct, in breach of s 9, does not have to be the sole cause, but it must be an effective cause, not merely something which was, in the end, immaterial to the suffering of the loss or damage.

[30] The Supreme Court’s approach therefore requires the Court to first ask whether a reasonable person in Mr Dieulangard’s position would have been mislead by the Dyson’s conduct.

[31] Mr Dieulangard’s position was that of a medical professional relatively unsophisticated in matters of business and property who was in a relationship of trust and dependency with the Dysons. The Supreme Court noted that:⁷

Conduct towards a sophisticated businessman may, for instance, be less likely to be objectively regarded as capable of misleading or deceiving such a person than similar conduct directed towards a consumer or, to take an extreme case, towards an individual known by the defendant to have intellectual difficulties. Richardson J in Goldsboro v Walker said that there must be an assessment of the circumstances in which the conduct occurred and the person or persons likely to be affected by it.

[32] Mr Dieulangard counted the Dysons as friends. He frequently stayed at their home for extended periods. He left his motor vehicle in their possession on the occasions of his return to France and allowed them to use it. They were co-sponsors

_{of his residency application. The relationship was, at least from Mr Dieulangard’s}

⁶ _{Red Eagle Corporation v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28] (citations omitted).}

⁷ Red Eagle Corporation, above n 6, at [28] (citations omitted).

perspective, close and trusting. I am left in no doubt that the Dysons would have been well aware of the limits of his commercial acumen and their ability to trade on the trust he had invested in them. Their representations were sophisticated. These included the site visits, at which the property was presented as the partnership’s, the presentation of architectural drawings, brand and advertising information and pamphlets.

[33] I consider a reasonable person with the known characteristics of Mr

Dieulangard would likely have been misled or deceived by the defendants’ conduct.

[34] Turning to assess the issue of remedy under s 43, I find that Mr Dieulangard was in fact misled and deceived by the plaintiffs. At the outset the initial investment of $91,000 was to be used towards “completing the purchase of the land” when in fact there was at no time an unconditional contract in respect of it, as Mr Tetley Jones makes clear in his affidavit. The balance of the monies were likewise invested on a false premise, namely that the partners at that stage co-owned the land. Together these representations were the material cause of Mr Dieulangard’s loss.

[35] In the result I find that Mr Dieulangard’s FTA claims are made out against both defendants. Acting in concert they misled or deceived Mr Dieulangard at each stage of his investment.

[36] I therefore make an order for compensation under s 43 of the FTA in the amount of $259,000 being the total of Mr Dieulangard’s investment.

Breach of fiduciary duty

[37] Although it is not necessary for the purposes of this judgment I also find the first cause of action against Mr Dyson for breach of fiduciary duty made out. I accept that there was a fiduciary relationship between Mr Dyson and Mr Dieulangard, in my view more in the nature of a partnership than the joint venture pleaded, but fiduciary nonetheless. Breaches of that relationship flow inevitably from the same factual background as supports the FTA claim.

Negligent misstatement

[38] I do not need to consider the allegations of negligent misstatement against Mr

Dyson.

Loan agreement

[39] The undisputed evidence is of an on demand loan at an interest rate of 12 per cent per annum for which demand has been orally made. Judgment follows inevitably from that premise.

Result

[40] I give judgment jointly and severally against the defendants for:

(a) The sum of $259,000 plus interest calculated in accordance with the

Judicature Act 1908.

(b) The sum of $100,000 together with simple interest thereon at the rate of 12 per cent per annum from 23 June 2009.

_{(c) Costs follow the event and are awarded on a 2B basis.}

Muir