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High Court of New Zealand Decisions |
Last Updated: 5 April 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA
WHANGĀREI TERENGA PARĀOA ROHE
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CIV-2013-488-223 [2018] NZHC 43
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BETWEEN
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JOHN CLIFFORD ROBINSON
Plaintiff
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AND
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WHANGAREI HEADS ENTERPRISES LIMITED
First Defendant
VICTOR LEONARD FREAKLEY
Second Defendant
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Hearing:
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12 September 2017
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Counsel:
Appearances:
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BA Vautier for defendants
JC Robinson, plaintiff in person
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Judgment:
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1 February 2018
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JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 1 February 2018 at 4 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors: Glaister Ennor, Auckland To: JC Robinson, Whangarei
Robinson v Whangarei Heads Enterprises Limited [2018] NZHC 43 [1 February 2018]
Introduction
[1] Mr Robinson (the plaintiff) and Mr Freakley (the second defendant) used to be business partners. In 2009 they formed a company called Whangarei Heads Enterprise Ltd (“WHEL”, the first defendant). It sold roading metals, undertook landscape works and hired out plant and equipment.
[2] In 2012, Mr Robinson and Mr Freakley had a major falling out about their business arrangements. One of the results was that Mr Freakley served a trespass notice on Mr Robinson, prohibiting him from entering the business premises. Mr Robinson was prosecuted and convicted for wilful trespass after he entered WHEL’s premises on 15 November 2012.
[3] Mr Robinson now sues WHEL and Mr Freakley in relation to the trespass notice and the prosecution, as well as in relation to other aspects of the parties’ business arrangements (“the trespass proceedings”). Mr Robinson pursues three causes of action:1
(a) Breach of contract;
(b) Deceit; and
(c) Injurious falsehood.
[4] The parties’ falling out also resulted in Mr Robinson bringing another set of claims against the defendants, in relation to a March 2012 civil-arrest order (“the arrest proceedings”). Those proceedings have now been resolved, by a substantive judgment of Gilbert J delivered on 25 May 2015.2 To the extent relevant, I will refer in this judgment to aspects of Gilbert J’s judgment, and other judgments in a string of related proceedings between the parties.
[5] As a preliminary point, I note Mr Robinson’s causes of action are directed at Mr Freakley only and not WHEL:
1 Mr Robinson has now withdrawn a cause of action alleging malicious prosecution.
2 Robinson v Whangarei Heads Enterprises Ltd [2015] NZHC 1147, [2015] 3 NZLR 734.
(a) The contract cause of action concerns alleged contractual agreements between Mr Robinson and Mr Freakley as shareholders of WHEL;
(b) The deceit cause of action is based on alleged representations made by Mr Freakley to Mr Robinson, which are said to have led Mr Robinson to enter into the contractual arrangements with Mr Freakley and which are the subject of the first cause of action; and
(c) The injurious falsehood cause of action is directed at statements Mr Freakley is said to have made about Mr Robinson, and the parties’ business arrangements, within the Whangarei Heads community and in separate related court proceedings.
[6] I return to this point at the conclusion of this judgment, in the context of costs.
Factual background
Introduction and first “paper” transfer of shares
[7] Mr Robinson and Mr Freakley formed WHEL in November 2009 as equal shareholders and co-directors. Mr Robinson separately had his own private business, a 40 hectare quarry in Opua, operated by his company Robinson Group Ltd. He additionally had an exporting business. Mr Robinson also frequently travelled to Vanuatu where he had other business interests.
[8] Mr Robinson began to experience financial difficulties in late 2010. He was using his cash reserves as well as funds from a family trust to support Robinson Group Ltd’s dwindling quarry operations. In early to mid-2011 (the precise timing is unclear), Mr Robinson and Mr Freakley discussed the possibility of Mr Robinson transferring his shareholding in WHEL to Mr Freakley. The purpose of this was to try to protect Mr Robinson’s assets from creditors, in the event Robinson Group Ltd became insolvent and Mr Robinson went bankrupt (Mr Robinson having guaranteed that company’s loans). There was some debate at the hearing as to who first suggested the transfer. Mr Freakley said that Mr Robinson did; Mr Robinson said Mr Freakley did. While the point is not material to my judgment, I prefer Mr Freakley’s evidence.
It would have been more logical for Mr Robinson to have initiated these discussions (being the party in financial difficulty) and is more consistent with Mr Freakley’s evidence at the hearing, which I found to be credible, that Mr Robinson took steps, with his accountant, to arrange a “paper” transfer of the shares without Mr Freakley’s further involvement.
[9] The details relating to the “paper” transfer are scant. However, WHEL’s accounts for the year ending 31 March 2011 record that Mr Freakley held 950 shares and Mr Robinson held 50 shares. This reflected a “transfer” by Mr Robinson of 450 of his 500 shares to Mr Freakley. Mr Robinson said that he had been advised by his accountant to retain 50 shares for his “protection” from Mr Freakley owning all the shares in WHEL. Consideration for the transfer was a $250,000 reduction in a
$750,000 loan from Mr Freakley to Robinson Group Ltd (secured by a mortgage). Mr Robinson said this was done because “some form of financial support was needed to give credibility to the share transfer for it to be valid.” The accounts were signed by both Mr Robinson and Mr Freakley on 7 July 2011. The “transfer” was not, it seems, otherwise recorded and no formal transfer was registered with the Companies Office.
Second “formal” transfer of shares
[10] Discussions evidently picked up again about the share transfer and, a few months later, Mr Freakley raised with Mr Robinson that he ought to do something more about the share transfer, as what had been done to date “wouldn’t hold any water” if he was trying to remove the shares from his name. Formal documentation was drawn up by Mr Robinson’s solicitor, a Mr Michael Badham, recording a transfer of 500 shares from Mr Robinson to Mr Freakley. A formal share transfer form was completed and registered at the Companies Office. A deed recording the $250,000 reduction of debt owed by Robinson Group Ltd to Mr Freakley was also entered into and, as the shares were owned by Mr Robinson a deed recording an advance of
$250,000 from him to Robinson Group Ltd. Mr Freakley says the final price for Mr Robinson’s shares had not yet been agreed, but given Mr Robinson was anxious to divest himself of the shares as soon as possible (due to his and Robinson Group Ltd’s deteriorating financial position), it was agreed the final price would be worked out later.
The alleged “private” agreement
[11] It is in relation to this formal transfer of Mr Robinson’s shareholding to Mr Freakley that the parties’ evidence sharply diverges. Mr Robinson says that the formal transfer of the shares discussed at [10] above was part of a broader, private agreement between him and Mr Freakley, reached in or around August/September 2011, that the transfer of his shares to Mr Freakley was to be on the following terms:
(a) On the basis of an agreed value of WHEL of $900,000;
(b) The share transfer would be “in name only”;
(c) Mr Robinson would remain a director of WHEL to protect his interests;
(d) The day-to-day business of WHEL was to remain the same;
(e) Mr Freakley’s reduction in his loan to Robinson Group Ltd was “on paper only”, he was still to get the full amount of interest on his loan and monthly payment shortfalls from Robinson Group Ltd would be offset by way of cash or goods to the equivalent value each month.
[12] Mr Robinson also gave evidence that given his financial difficulties at that time, as well as health issues and a deteriorating marriage, he was considering moving permanently to Vanuatu. He says that he and Mr Freakley continued their discussions about WHEL and in or around the first week of October 2011 (that is, before the entry into the formal documentation referred to at [10] above), they further agreed that:
(a) That Mr Robinson and Mr Freakley would each have an option to buy out the other on the following terms:
(i) If Mr Freakley bought Mr Robinson’s share of the company, Mr Freakley would pay Mr Robinson $360,940 plus return an office block to Mr Robinson;
(ii) That if Mr Robinson bought Mr Freakley’s share of the company, Mr Robinson would pay $450,000.00 to Mr Freakley.
(b) That the prior agreement over the shares in WHEL would continue until such time as either Mr Freakley or Mr Robinson purchased WHEL in accordance with paragraph [12](a) above.
(c) That pending the exercise of the option In accordance with paragraph [12](a)(i) above, Mr Freakley:
(i) Would initially take over the management and operate WHEL from 12 October 2011 for a 12 month period; and
(ii) Would during that period, pay Mr Robinson $1,056.47 on the 12th day of each month in lieu of interest for Mr Robinson’s share WHEL.
(d) That pending exercise of the option in accordance with paragraph [12](a)(i) above, Mr Robinson:
(i) Would reside in the office block;
(ii) Would be paid by WHEL $40.00 per hour for digger work;
$30,00 per hour for contract work; and $15,00 per hour for work at the premises of WHEL.
(e) That Mr Freakley had until 12 November 2012 to exercise the option set out in paragraph [12](a)(i) above.
(f) That in the event that Mr Freakley did not exercise the option set out in paragraph [12](a)(i) by 12 November 2012, Mr Robinson:
(i) Would take over the management and operate WHEL for a further 12 month period; and
(ii) Would during that period, pay Mr Freakley $1,500.00 per month in lieu of interest for Mr Freakley’s share in WHEL.
(g) That Mr Robinson had until 12 November 2013 to exercise the option set out in paragraph [12](a)(ii) above.
(h) That if neither Mr Freakley nor Mr Robinson exercised the options set out in paragraphs [12](a)(i) and [12](a)(ii) above by 12 November 2013, Mr Robinson and Mr Freakley would return to jointly managing and operating WHEL.
[13] None of these (somewhat complicated) matters were recorded in the formal documentation containing Mr Robinson’s transfer of his shares to Mr Freakley and referred to at [10] above. Mr Robinson says it was common for him to undertake much of his business dealings himself without involving his solicitor (Mr Badham), and then only asking Mr Badham to assist on a small part of the transaction, without informing him of the broader picture. Mr Robinson called Mr Badham to give evidence on this point. Mr Badham confirmed that it was very common for him to receive instructions from Mr Robinson on a narrow issue only, without full information as to what the matter was about.
[14] Mr Robinson further says that sometime in early November 2011, and with Mr Freakley’s agreement, he created a handwritten “formal record” of what he and Mr Freakley had agreed. This document is central to Mr Robinson’s claim. I will refer to it as the “options page”. Given the prominence the options page assumed at the hearing, I have copied it in full below:
[15] Mr Freakley denies that he agreed these matters with Mr Robinson. Rather, he says, consistent with the formal documentation the parties entered into, Mr Robinson transferred his shares to Mr Freakley on an absolute basis. He says that in discussing matters with Mr Robinson, he (somewhat reluctantly) agreed the value for WHEL proposed by Mr Robinson of $900,000, such that with other (uncontested) adjustments made for greater investment by Mr Freakley in WHEL, the final price for Mr Robinson’s 500 shares would be $316,940. Given the $250,000 reduction in debt owing by Robinson Group Ltd to Mr Freakley would not cover that amount, there was a balance of $66,940 to be paid by Mr Freakley to Mr Robinson. There was no dispute that Mr Freakley could not pay the full price to Mr Robinson at the time. This was accordingly money he would need to pay to Mr Robinson over time. Mr Freakley also accepts that he agreed that Mr Robinson could temporarily reside in the office at WHEL’s premises until he reconciled with his wife.
[16] In terms of Mr Robinson’s ongoing involvement in WHEL, Mr Freakley denies that he and Mr Robinson agreed Mr Robinson would remain as a director; rather he says Mr Robinson was supposed to resign as a director after the share transfer.
[17] In relation to the options page prepared by Mr Robinson, Mr Freakley denies this recorded an earlier agreement between him and Mr Robinson. He says it was simply a set of options Mr Robinson put to him at a meeting between the two men after the shares had been transferred, as a basis to sort out a range of matters between them. Mr Freakley points to a second copy of the options page with his own hand- written annotations on it, which he says he had made when he took the document home after the meeting to consider it further. Mr Freakley’s annotations indicate queries or issues he had with the proposals, including the $1056 per month figure, given it was calculated on the basis of the full $316,940 purchase price being outstanding and did not take into account the $250,000 reduction in the Robinson Group Ltd loan.
[18] Ultimately, while Mr Freakley accepted in cross-examination that he agreed with some aspects of the document, being the value of WHEL (at $900,000), the final purchase price for Mr Robinson’s shares of $316,940 and the document’s references to the Hilux vehicle, office block cost and “differential” of investment in WHEL as
between Mr Robinson and Mr Freakley (Mr Freakley having contributed some
$97,000 more), he never agreed to other matters alleged by Mr Robinson, including that the share transfer was “in name only” or the proposed buy-back/option arrangements Mr Robinson set out in the options page. His evidence was that at its highest, there was a “gentleman’s agreement” that if and when Mr Robinson was in a better financial position, he could buy back his shares from Mr Freakley (at their value at the time of any such buy-back).
Mr Robinson abandons his trust argument
[19] Before continuing with subsequent events, it is necessary to elaborate on Mr Robinson’s pleaded case that the share transfer was on the basis Mr Freakley would hold the shares on trust, or the transfer being “in name only”. In the arrest proceedings,
Gilbert J expressly considered this issue and found as follows:3
[8] Mr Robinson remained a director despite the transfer. He claims that the shares were transferred to Mr Freakley on the basis that he would hold them for Mr Robinson in trust until agreement was reached on which party would buy the other out and on what terms. Mr Freakley says that the transfer was absolute and there was no discussion of any trust. I accept Mr Freakley’s evidence on this issue. The contemporaneous documents, including the transaction documents prepared by Mr Robinson’s solicitor, are inconsistent with any trust arrangement. The agreement that Mr Robinson would continue as a director simply recognised that he had not been paid for his shares.
[Emphasis added]
[20] Mr Robinson accepts he is bound by Gilbert J’s finding that there was no trust arrangement as between him and Mr Freakley. In response,4 and despite expressly pleading a trust arrangement, at the hearing, Mr Robinson focused his argument on the arrangement being contractual only. On this basis, it is implicit that Mr Robinson accepts the share transfer was absolute, but alleges the parties expressly agreed the buy-back arrangements as set out in the options page.
3 Robinson v Whangarei Heads Enterprises Ltd [2015] NZHC 1147, [2015] 3 NZLR 734.
Subsequent events
[21] Turning back to subsequent events, Mr Freakley arranged for WHEL to make three payments of the $1056 per month to Mr Robinson. Bank account statements for WHEL were produced which showed two of these payments; the first on 12 December 2011; the second on 16 January 2012. The payments were described on the bank statements by Mr Freakley as “interest”. Mr Robinson says these amounts were interest on the $316,940 value of his shares and compensated him for his remaining interest in WHEL (on the basis the share transfer was “in name” only). Mr Robinson also points to other handwritten records by Mr Freakley referencing these payments as “interest”, which he says is consistent with the terms of the options page having been agreed.
[22] Mr Freakley was questioned about these payments and why he made them. He said that after the share transfer, Mr Robinson was insistent Mr Freakley pay these amounts, as Mr Robinson needed the money to go back into his family trust. Mr Freakley said that while he did not agree with the nature or reason for the payments, given Mr Robinson’s insistence that he needed the money, he paid those amounts on the basis that it would all “work out in the wash”, given he still owed Mr Robinson for the balance of the purchase of Mr Robinson’s shares, so his payment of those amounts could be deducted from the outstanding balance. Mr Freakley said he therefore did not consider the payments as interest on the full $316,940, as Mr Robinson proposed. He (somewhat sheepishly) said that he had written “interest” in relation to these payments in WHEL’s books as it would enable them to be tax deductible to WHEL. Mr Freakley’s evidence in this regard was credible and I accept it.
[23] Mr Freakley stopped paying the monthly amount of $1,056 in early 2012. He says he did this because of other dealings concerning Mr Robinson which he had uncovered, including that Mr Robinson had personally invoiced Whangarei District Council for contract works which Mr Freakley considered had been undertaken by WHEL. Whether or not that was the case is irrelevant, and no particular evidence was led on this point in any event. Nevertheless, Mr Freakley’s belief in this regard led him to cease making the monthly payments to Mr Robinson.
[24] Matters further deteriorated when, in February 2012, Mr Freakley tried to raise a $50,000 loan for WHEL from the Bank of New Zealand. Mr Freakley said the Bank had told him that the loan could not be advanced while Mr Robinson remained a director. Mr Freakley said he was surprised to learn that Mr Robinson was still a director, given Mr Freakley’s position was that upon the share transfer, Mr Robinson was supposed to have also resigned as a director.
[25] Mr Freakley complained about this to WHEL’s solicitor at the time (Mr Badham). In Mr Badham’s absence, Mr Freakley discussed the matter with a member of Mr Badham’s team, who in turn discussed the matter with Mr Robinson. Mr Freakley said a member of that team informed him that Mr Robinson would not agree to being removed as a director as it was his “safeguard” for the outstanding monies that Mr Freakley still owed him.5 Mr Freakley said that on that basis, he left matters as they were for the time being, knowing that as the owner of all WHEL’s shares, he would be able to remove Mr Robinson as a director in due course, if required.
[26] Mr Robinson’s solicitor, Mr Badham, gave evidence of his dealings with Mr Freakley at this time. Mr Badham was clear in his evidence that in this context, he was acting as WHEL’s solicitor. Mr Badham said the following:
I took control of the file from [Mr Badham’s team member] on or about 2 March 2012. On that date I met with Vic Freakley in his capacity as a director of the Company. At that meeting he signed the documentation to give effect to the Bank instructions. I explained to Vic Freakley that I also need to obtain the signature of John Robinson on the Bank documents in his capacity as a director of the Company. The discussion extended into a discussion about Vic Freakley’s understanding of an arrangement that he had with John Robinson in relation to the 500 shares in the Company that Vic Freakley had acquired from John Robinson in October 2011. Vic Freakley told me that his arrangement with John Robinson was that he had a year to pay John for the shares at an agreed price. If he was unable to come up with that money, then he would return those shares to John Robinson who would have a further year to buy out Vic Freakley’s 500 shares in the Company at the same price.
[27] Mr Vautier, counsel for Mr Freakley, objected to this evidence, on the basis that it was privileged to WHEL. However, as I conveyed to Mr Vautier at the hearing, it seems to me that at least this aspect of Mr Freakley’s discussion with Mr Badham was in the context of Mr Freakley’s role as a shareholder in WHEL, rather than a communication with Mr Badham for and on behalf of WHEL. Given this, this aspect of the meeting was not a solicitor-client communication made in the course of and for the purpose of WHEL requesting or obtaining professional legal services from Mr Badham. Further, Mr Badham first gave this evidence in July 2012, in an affidavit filed in connection with the arrest proceedings. Similar evidence was given before Gilbert J in those proceedings in 2015. Not surprisingly, given the time that has passed, and that Mr Vautier was not counsel for Mr Freakley in those proceedings, he could not point to any objection being taken to the evidence being given at that time. As such, even if the material were privileged, it is highly likely that privilege has been waived, given WHEL did not object to the evidence being admitted in 2012 and 2015.
[28] I return to Mr Badham’s evidence later in this judgment, as Mr Robinson relies on it to further support his argument that he and Mr Freakley agreed the terms set out in the options page. It is sufficient to record for present purposes that Mr Freakley was cross-examined about this conversation and strongly denies he had a conversation with Mr Badham in the terms alleged.
Events leading to Mr Robinson’s arrest
[29] Matters between Mr Robinson and Mr Freakley came to a head later in March 2012. Robinson Group Ltd had been put into receivership in the interim. Mr Robinson says he learned that Mr Freakley had been dealing with the receivers without Mr Robinson’s knowledge. An argument ensued. It seems Mr Freakley made it clear to Mr Robinson that he was not going to make any further payments to Mr Robinson in relation to the shares.
[30] Mr Robinson then took certain equipment from WHEL (including a loader, tractor and log splitter) and hid it around the Whangarei Heads district. His statement of claim says that he was entitled to do so, as he remained a director and also a beneficial owner of 500 shares in WHEL. In his evidence, Mr Robinson explained
that he took the equipment to “encourage [Mr Freakley] to settle what as fast becoming a real mess”. Over the weekend of 16–17 March 2012, Mr Freakley made a complaint to the police, but they declined to take any action, on the basis it was a civil dispute.
[31] Mr Robinson then sent Mr Freakley two documents dated 19 March 2012.6 One document was a notice purporting to trespass Mr Freakley from the WHEL business premises. The other was headed “Statement”, in which Mr Robinson complained about Mr Freakley’s breach of the agreement he alleged had been reached between himself and Mr Freakley, stating:
As a Director of [WHEL] and Co-Owner of the business, I have taken certain steps to protect my equity in [WHEL].
Your statement that you no longer intend to honour your agreement with me regard to the transfer of my shares into your name and the failure by you to make the agreed monthly payment has forced me to uplift plant and machinery to be held in storage until this matter can be resolved.
...
As I am aware that technically you are a 100% shareholder in [WHEL] until such time as the share transfer can be made null and void by the Courts, I will be resigning as Director until such time as the Courts reinstate my rightful shares.
[32] Mr Robinson said he intended to resign as a director to protect himself from any action Mr Freakley might take on the company’s behalf; in other words, to safeguard himself from any directorial liability while Mr Freakley was in control of WHEL. Nevertheless, before Mr Robinson took steps to remove himself as director, Mr Freakley passed a shareholder resolution removing Mr Robinson from his position as director in any event.
[33] There were discussions between the parties about the return of the equipment, the details of which are not relevant to this judgment. However, by 20 March 2012, Mr Robinson had not returned the equipment. Mr Freakley was aware at that time that Mr Robinson was about to travel to Vanuatu. On 20 March 2012, Mr Freakley’s solicitors wrote to Mr Robinson’s solicitors demanding the immediate return of
WHEL’s equipment. They advised that if this did not occur by noon that day, they were instructed to “obtain a writ of arrest” from the High Court.
[34] Ultimately, an arrest for Mr Robinson as an absconding debtor was issued on 21 March 2012. Mr Robinson was arrested later that day as he was about to board his flight to Vanuatu. He was taken to Mt Eden Prison and held in custody for around 20 hours, before being released. These events formed the basis for the arrest proceedings. Gilbert J found there were no reasonable and proper grounds for the arrest orders. Mr Robinson’s claims for abuse of process and malicious prosecution failed, but Gilbert J awarded Mr Robinson $10,000 compensation for his loss of liberty.
Mr Robinson’s conviction for wilful trespass
[35] The events leading to Mr Robinson’s conviction for wilful trespass happened around eight months later, in November 2012. The basic facts are not in dispute, and I gratefully adopt Allan J’s summary of them in his judgment on Mr Robinson’s appeal against his wilful trespass conviction:7
[11] It is common ground that a trespass notice was duly served on Mr Robinson on 13 November 2012. Prior to that, he had apparently evinced an intention to return to the company's premises, he having stayed away for a significant period because, he says, Mr Freakley was entitled to have control of the company for a one year period. Two days later, on 15 November 2012, Mr Robinson walked into the offices of the company. Mr Freakley was there. Mr Freakley said that Mr Robinson had come onto the property because he wanted to test the validity of the trespass notice in court. There was no confrontation. Mr Robinson was polite. Indeed, Mr Freakley said he was ‘smug’. The police were called. Mr Robinson was arrested and charged with wilful trespass.
[36] Mr Robinson’s entry into the WHEL premises in November 2012 was because he believed he and Mr Freakley had reached the contractual arrangement set out in the options page, such that Mr Robinson was entitled to take control of WHEL for the period November 2012 to November 2013.
7 Robinson v Police [2013] NZHC 1511.
[37] Mr Robinson was convicted of wilful trespass following a District Court hearing before Judge Davis on 11 February 2013.8 The key issue identified by Judge Davis was whether Mr Robinson had a legal right to be on WHEL’s premises at that time. The Judge referred to the formal share transfer and other documentation referred to at [10] above, and that Mr Freakley was recorded as WHEL’s sole director and shareholder. Mr Robinson argued before the District Court that these transactions were all “paper transactions” and that “in reality Mr Freakley was holding these shares on trust for him”. Judge Davis noted that no evidence was produced to show the creation of the trust or the terms upon which the shares were said to be held in trust.
[38] Ultimately, Judge Davis considered the “documents speak for themselves” and that the legal position was clear as to the ownership of WHEL. He concluded Mr Robinson did not have a legal interest in WHEL. Judge Davis noted that whether or not Mr Robinson had an equitable interest in WHEL was not a matter requiring resolution on the prosecution and that there were already High Court proceedings on foot in relation to those matters. Ultimately Judge Davis, having referred to the formal documentation between Mr Robinson and Mr Freakley, concluded as follows:9
That in my view does not have the hallmarks of a trust relationship that Mr Robinson is alleging occurred, and to that extent I reject that defence that he as proffered today. The relationship has all the hallmarks of being of a commercial nature – that relationship having subsequently soured.
[39] On appeal, Allan J was satisfied there was a proper basis for the determination of Mr Robinson’s guilt.10 But he concluded the consequences of the conviction would be out of proportion to the gravity of Mr Robinson’s offending, and so discharged Mr Robinson without conviction.11
Mr Robinson’s bankruptcy and Official Assignee’s proceedings
[40] Mr Robinson was adjudicated bankrupt in December 2012. The Official Assignee subsequently made claims against Mr Freakley (and WHEL) in relation to
8 Police v Robinson DC Whangarei CRI-2012-088-003883, 11 February 2013.
9 At [15].
10 Robinson v Police [2013] NZHC 1511 at [31].
11 At [38].
Mr Freakley’s purchase of Mr Robinson’s shares. Proceedings were commenced in October 2016. Those proceedings were settled in December 2016. A copy of the Official Assignee’s statement of claim and the settlement agreement were admitted into evidence at the hearing before me by consent. The Official Assignee’s first cause of action against Mr Freakley was for breach of contract, namely to recover the outstanding balance of the purchase price for Mr Robinson’s shares of $66,940. The second cause of action alleged that:
(a) Mr Robinson’s personal guarantee of Robinson Group Ltd’s obligations to Mr Freakley comprised an insolvent gift under s 205 of the Insolvency Act 2006; and
(b) As such, the Official Assignee sought an order cancelling the guarantee, with a consequent order that Mr Freakley pay the Official Assignee
$250,000, being the value of the property transferred from Mr Robinson to Mr Freakley under the guarantee.
[41] The Official Assignee sought similar orders on the third cause of action, which alleged that setting off the $250,000 against Mr Robinson’s obligations to Mr Freakley under the guarantee also constituted an insolvent gift under s 204 of the Insolvency Act.
[42] The Official Assignee’s proceedings were settled by agreement reached in December 2016. In settlement of all claims arising in relation to Mr Robinson’s bankruptcy, Mr Freakley and WHEL agreed to pay the Official Assignee the sum of
$316,000.12
[43] I now turn to consider each of Mr Robinson’s pleaded causes of action.
Contract claim
[44] Based on those matters set out at [11] and [12] above giving rise to a binding contract between the parties, Mr Robinson pleads the following breaches by Mr Freakley:
(a) taking full control of WHEL “on or about the second week in March 2012”;
(b) removing Mr Robinson as director of WHEL;
(c) serving trespass notices on Mr Robinson;
(d) forcing Mr Robinson to vacate WHEL’s premises, and so denying Mr Robinson title to what was his under the agreement;
(e) having Mr Robinson trespassed from WHEL’s premises on 15 November, thereby resulting in Mr Robinson’s arrest for trespass and denying him his right to operate WHEL for the next 12 months;
(f) failing to acknowledge the agreement, which led to Mr Robinson’s conviction for trespass; and
(g) failing to allow Mr Robinson to share in the joint management of WHEL.
Analysis
[45] I have carefully considered all of the evidence and the relevant documentary materials. Ultimately, I am not satisfied Mr Robinson has demonstrated that he and Mr Freakley entered into the contractual arrangements as alleged. I say this for the following five reasons.
[46] First, and importantly, the formal documentary materials are clear on their face. Mr Robinson transferred his 500 shares to Mr Freakley on an absolute basis, with an immediate reduction in the debt owed by Robinson Group Ltd to Mr Freakley. The contractual materials make no reference to any of the additional terms alleged by Mr Robinson. Mr Robinson is of course correct that a contract can be partly written and partly oral. However, proof of the oral terms of a partly written, partly oral contract is necessarily more difficult.
[47] Second, I am not satisfied the options page reflects a binding agreement between Mr Robinson and Mr Freakley:
(a) It is not signed or initialled by Mr Robinson and Freakley, which would have been a very simple and obvious step to have taken had the document been prepared as a “formal record” of their earlier agreement, as Mr Robinson alleges.
(b) Further, the content of the document itself and, in particular, its reference to a “Possible sort out WHELTD” (emphasis added) is more consistent with a proposal being put by Mr Robinson to Mr Freakley, rather than being a record of an earlier concluded agreement.
(c) The above point is reinforced by the second copy of the options page containing Mr Freakley’s handwritten notations, evidencing that several queries or objections remained in relation to the proposal advanced by Mr Robinson.
[48] For these reasons, I prefer Mr Freakley’s evidence as to the nature and effect of the options page.
[49] Third, while Mr Freakley did make three payments of $1.056 to Mr Robinson, that is not inconsistent with his evidence that he did not agree all matters set out in the options page. The options page does not itself refer to the $1,056 sum as “interest”. And, as outlined above, I accept Mr Freakley’s evidence that he noted these payments in WHEL’s books as “interest” to enable them to be claimed as a tax deduction. I also
accept Mr Freakley’s evidence that he paid these amounts due to Mr Robinson’s insistence that he needed money at that time for his family trust, and given Mr Freakley’s view that he could simply set off those amounts against the balance he owed Mr Robinson for the purchase of his shares.
[50] Fourth, Mr Robinson’s position as to the nature of the contractual arrangements between himself and Mr Freakley has changed quite significantly over time. Until the hearing, his position was that Mr Freakley held Mr Robinson’s shares on trust for Mr Robinson. However, following Gilbert J’s rejection of that argument, Mr Robinson argued for an absolute transfer, but on terms that would see the shares returned to him in due course (namely, if Mr Freakley did not exercise his “option” to purchase by November 2012). The two cases are necessarily inconsistent. This further undermines the certainty and clarity of any “private” arrangement between the parties.
[51] Fifth, while I accept that Mr Badham’s evidence, and other evidence called on behalf of Mr Robinson and taken as read (discussed further below), is supportive of Mr Robinson’s position, I do not consider it demonstrates a binding contractual arrangement entered into as alleged by Mr Robinson.
[52] Mr Badham’s evidence as to his discussion with Mr Freakley is firmly denied by Mr Freakley. I have no particular reason to doubt Mr Badham’s evidence, but his statement of what Mr Freakley told him about the arrangement is somewhat different to the arrangements pleaded by Mr Robinson. For example, Mr Badham’s evidence does not refer to the transfer being “in name only”, subject to a trust arrangement or similar. The evidence also refers to Mr Robinson’s option to buy Mr Freakley’s shares as being at the same price as Mr Freakley’s option to purchase Mr Robinson’s shares. The options page had quite different prices for the parties’ respective options. Nor does Mr Badham’s evidence refer to any other terms of the pleaded arrangement. Collateral evidence of this nature would need to be very clear, in my view, to counter the clear documented record of the share transfer between Mr Robinson and Mr Freakley.
[53] Similarly, while evidence of Mr Alan Gilbert and Mrs Julie Gilbert (Mr Freakley’s former wife) again supports Mr Robinson’s position, their evidence is
based entirely on what Mr Robinson told them about his arrangements with Mr Freakley. For that reason, their evidence does not take Mr Robinson’s case very far.
[54] Ultimately, the only clear evidence of a contractual agreement between Mr Robinson and Mr Freakley is the formal documentation of the share transfer and associated loan reduction as set out at [10] above. While I have no doubt there were further discussions between Mr Robinson and Mr Freakley in late 2011 in relation to arrangements between themselves and with WHEL, and that some further matters were agreed (such as the final purchase price for Mr Robinson’s shares), that evidence falls short of evidencing entry into a binding contractual arrangement on the terms alleged.
[55] I note that even if I had been satisfied Mr Robinson either transferred his shares to Mr Freakley on the basis Mr Freakley was to hold them on trust for Mr Robinson until some later point in time, or transferred them subject to some contractual form of “buy back” arrangement, given Mr Robinson’s stated purpose of the transfer was to defeat his creditors, any such arrangements may have been legally invalid in any event.
[56] In terms of the trust argument, and as noted by Associate Judge Bell in related proceedings between these parties, the share transfer must have been absolute.13 The Court of Appeal has explained the position as follows:14
As a general principle, a party will not be permitted to adduce
evidence that in transferring legal title to another he or she intended to retain the beneficial interest if the effect of the evidence would be to disclose that the transfer had a fraudulent purpose. For example, it would be fraudulent to hold out that a wife was the beneficial owner if in reality the husband had retained the relevant beneficial interest. ...
The same principle applies where a husband has put property into his wife’s name as a protection against creditors...
[Emphasis added]
13 Robinson v Whangarei Heads Enterprises Ltd [2013] NZHC 1029 at [12]. Allen J made similar observations in his judgment on Mr Robinson’s appeal from his conviction for wilful trespass: Robinson v Police [2013] NZHC 1511 at [6] to [7].
14 Potter v Potter [2003] NZCA 103; [2003] 3 NZLR 145 (CA) at [20] (citations omitted).
[57] More recently, the Court of Appeal in Potter v Horsfall confirmed these principles are not restricted to family transactions, concluding that:15
In short, a court of law will not permit a party to avoid the consequences of a course of action deliberately taken, by adducing
evidence that the course of action taken was for an unlawful purpose such as avoiding tax or defeating creditors.
[Emphasis added]
[58] Most recently, in a decision released in December 2017, the Supreme Court dismissed Mr Horsfall’s appeal of the Court of Appeal’s judgment in Potter v Horsfall.16 In doing so, William Young J, writing for a majority of himself, Glazebrook, O’Regan and McGrath JJ, described cases involving one person (A) placing property in the name of another person (B) to defeat A’s creditors, but “with the understanding that A was to remain the ‘true’ owner and might recover the property when the coast was clear” as the “paradigm case”.17 His Honour observed the “contractual flavour” of paradigm cases, which brings into play the Illegal Contracts Act 1970 (now sub-pt 5 of pt 2 of the Contract and Commercial Law Act 2017).18 William Young J went on to note that paradigm cases should be addressed in terms of the Illegal Contracts Act.19 As a result, and in the absence of relief being granted by the court under the Illegal Contracts Act, a contractual arrangement in a paradigm case would be illegal and of no effect.20
[59] As I have rejected Mr Robinson’s claim of a share transfer “in name only” or on the contractual terms alleged, it is not necessary to consider these potential legal (rather than factual) obstacles to Mr Robinson’s claim any further. I simply note these issues as, had Mr Robinson proved a private contractual agreement with Mr Freakley on the terms alleged, I would have needed to hear further from the parties on whether any such agreement was valid and/or enforceable in any event, given its purpose was to defeat Mr Robinson’s creditors.
15 Potter v Horsfall [2016] NZCA 514, [2016] NZFLR 974 at [32].
16 Horsfall v Potter [2017] NZSC 196.
17 At [44].
18 At [56].
19 Though noting (at [59]) the continuing relevance of cases relied on by the Court of Appeal in Potter v Potter [2003] NZCA 103; [2003] 3 NZLR 145 (CA) and Potter v Horsfall [2016] NZCA 514, [2016] NZFLR 974.
20 Illegal Contracts Act, s 73.
[60] I further note that the position in relation to Mr Robinson’s shares in WHEL is unlikely to have been materially different even if Mr Robinson had proved the alleged contractual arrangements and those arrangements had been carried out. Under the pleaded arrangement, if Mr Freakley had wanted to “buy out” Mr Robinson, he would have needed to pay Mr Robinson the balance of the $316,940 purchase price for the shares before November 2012, otherwise Mr Robinson’s shares would have “reverted” to him at that time. Mr Robinson was adjudicated bankrupt one month later in December 2012. In either scenario, the payment for the shares, or the shares themselves, would have formed part of Mr Robinson’s estate in bankruptcy available for satisfying creditors’ claims. Ultimately, as events have transpired, and given Mr Freakley and WHEL’s settlement with the Official Assignee, the agreed value for Mr Robinson’s shares in WHEL has been made available to Mr Robinson’s creditors, as it ought to have been from the outset.
[61] For completeness, had I accepted Mr Robinson’s contractual claim, some of the relief he seeks on this cause of action is problematic. Mr Robinson seeks:
(a) General damages of $20,000 on account of stress. Damages for stress are generally not awarded for breaches of commercial contracts, at least where the stress suffered is an ordinary incident of the plaintiff’s commercial life.21
(b) Exemplary damages. But in Paper Reclaim Ltd v Aotearoa International Ltd, the Court of Appeal decisively ruled that exemplary damages are not available for breach of contract.22
(c) Nominal damages. These are awarded where a breach of contract is proved, but where the plaintiff has not proved any loss. Such awards appear to range from $1 to $500 only. Further, a party who recovers
22 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).
nominal damages is not necessarily regarded as “successful” in terms of costs.23
[62] Accordingly, for the reasons set out in this section of my judgment, Mr Robinson’s contract cause of action is dismissed. I now turn to consider Mr Robinson’s remaining two causes of action.
Deceit
[63] Mr Robinson says Mr Freakley acted deceitfully by making the following representations (on which Mr Robinson says he relied):
(a) By agreeing to hold Mr Robinson’s shares in WHEL “on trust” for Mr Robinson, and agreeing that Mr Robinson would remain a director.
(b) By agreeing to include the office block in the agreed purchase price for Mr Robinson’s shares in WHEL “when he retained ownership of the office block”.
(c) By agreeing to hand over operation of WHEL to Mr Robinson after 12 months if he (Mr Freakley) had not taken up an option to buy Mr Robinson’s shares.
[64] Mr Robinson says that as a result of these deceitful representations, his shares in WHEL remain in the hands of Mr Freakley, he (Mr Robinson) is no longer a director, and he has suffered inconvenience, worry, strain and added depression. He seeks an order for the transfer of the 500 shares in WHEL to the Official Assignee, general damages of $20,000, and exemplary damages.
[65] In Amaltal Corp Ltd v Maruha Corp, the Court of Appeal confirmed the elements of the tort of deceit as follows:24
24 Amaltal Corp Ltd v Maruha Corp [2006] NZCA 112; [2007] 1 NZLR 608 (CA) at [46] and [55].
(a) A false representation (as to a past or existing fact) made by a defendant who knew it to be untrue or had no belief in its truth or who was reckless as to its truth;
(b) Intention that the claimant should have acted on the representation; and
(c) Action by the plaintiff in reliance on the representation.
[66] The key issues in an action for deceit are in:25
(a) Whether there is sufficient evidence that the representation was made;
(b) If so, whether it was a representation as to a present or past fact;
(c) If so, whether the representation was false at the time it was made;
(d) If so, whether there is sufficient evidence that, at the time the representation was made, the defendant lacked an honest belief in the truth of the representation;
(e) If so, whether there is sufficient evidence that the plaintiff relied on that representation; and
(f) If so, whether there is sufficient evidence of the plaintiff suffering loss as a result.
Analysis
[67] For the reasons given in relation to Mr Robinson’s contract claim, Mr Robinson’s deceit claim must fail. I am not persuaded Mr Freakley represented that he would hold Mr Robinson’s shares on trust and, as noted, Mr Robinson did not pursue this argument at the hearing in any event. For the reasons set out above, I also reject Mr Robinson’s claim based on an alleged representation by Mr Freakley that he
25 Sahu Khan v Shariff [2017] NZHC 294 at [25].
would hand over the operations of WHEL to Mr Robinson in November 2012 if Mr Freakley had not exercised his option to purchase Mr Robinson’s shares by that time.
[68] Nor am I persuaded that Mr Freakley represented that Mr Robinson was to remain as a director of WHEL. It would have been logical that, having divested himself of all his shares in WHEL, Mr Robinson also ceased to be a director. I accept Mr Freakley’s evidence that he was surprised to learn in February 2012 that Mr Robinson was still a director, when Mr Freakley was trying to secure the bank loan for WHEL.
[69] Mr Robinson’s own evidence was that he was going to resign as a director in any event. He had communicated this in his “Statement” of 19 March 2012 (not being aware of Mr Freakley removing him as a director the previous day). I have no doubt that, had Mr Freakley not removed Mr Robinson as a director, Mr Robinson would have resigned. Mr Robinson did not suggest otherwise. On this basis, it is difficult to see any loss flowing to Mr Robinson as a result of his removal as a director of WHEL.
[70] As noted at [63](b) above, Mr Robinson also says Mr Freakley made a knowingly false representation to the effect the WHEL office block would be included in the agreed purchase price for Mr Robinson’s shares, “when he retained ownership of said office block”. Mr Freakley accepts a price had been agreed for the office block ($22,222.22) and it would be excluded from WHEL’s assets for the purposes of calculating WHEL’s value and thus the price for Mr Robinson’s 500 shares. However, the agreed price for Mr Robinson’s shares did take into account the value of the office block. Given this, the alleged representation by Mr Freakley was factually correct. As a result, this aspect of Mr Robinson’s deceit claim must also fail. The crux of Mr Robinson’s complaint in this regard is an allegation that Mr Freakley later represented WHEL owned the office block. That allegation is addressed later in this judgment, in the context of Mr Robinson’s claim of injurious falsehood.
[71] Finally, and like the contractual cause of action, even if I had found Mr Robinson’s deceit claim made out, aspects of the relief sought are problematic. In particular, in addition to general damages of $20,000 and unquantified exemplary damages, Mr Robinson seeks an order transferring 500 shares in WHEL to the Official
Assignee. Putting aside Mr Robinson’s ability to seek such an order (in effect) on the Official Assignee’s behalf, as noted, the Official Assignee has already brought and settled proceedings against Mr Freakley in relation to the share transfer. As also noted, in settlement of the Official Assignee’s claims, Mr Freakley and WHEL agreed to pay the Official Assignee $316,000, being the purchase price for Mr Robinson’s shares. Given this, there would be no basis also to transfer the shares themselves to the Official Assignee.
[72] Mr Robinson’s deceit cause of action is accordingly dismissed.
Injurious falsehood
[73] Mr Robinson’s final cause of action, injurious falsehood, covers somewhat different matters to his breach of contract and deceit claims. Mr Robinson says:
(a) Mr Freakley made malicious false statements to the police when securing the trespass order (by saying Mr Robinson had no right to be at WHEL’s premises, that the office block did not belong to Mr Robinson, and that Mr Robinson was not rightfully a director of WHEL).
(b) Mr Freakley made (unspecified) malicious and false statements when writing to his ex-wife, Julie Freakley (now Mrs Julie Gilbert) on 26 March 2012 (neither the event, nor the statements are specifically pleaded in Mr Robinson’s “final statement of claim”).
(c) Mr Freakley made malicious and false statements to the District Court on 11 February 2013, saying that he was the 100 per cent owner and director of WHEL, that Mr Robinson had no authority to be in WHEL’s office in November 2012, that he could not recall any agreement letting Mr Robinson re-enter WHEL after 12 months, and by denying he and Mr Robinson had agreed Mr Robinson would have the right to retake control over WHEL after 12 months.
(d) Mr Freakley made (again, unspecified) malicious and false statements to members within the Whangarei Heads community in order to cause harm to Mr Robinson, as evidenced by statements to a Mr Bruce Bowyer.
[74] As a result, Mr Robinson says that he was deprived from his place of residence (the WHEL office block) and his right to operate WHEL; he was caused ongoing discomfiture, loss of liberty and injury to his feelings and reputation; and Mr Freakley retained certain benefits relating to the operation and control of WHEL.
[75] Mr Robinson accordingly seeks general damages of $20,000, unspecified “pecuniary” damages, unspecified “special damage” and unspecified “consequential loss”.
[76] A particular issue with Mr Robinson’s third cause of action is its lack of specificity, primarily in relation to statements said to have been made by Mr Freakley to members of the Whangarei Heads community. The statements have not been particularised or otherwise clearly spelled out in the pleadings. Moreover, other statements which Mr Robinson considers to be false and malicious representations were put to Mr Freakley in cross-examination, when they had not been specified in Mr Robinson’s pleading or in Mr Robinson’s own evidence. Further, Mr Robinson has not particularised the facts upon which he relies in alleging malice, as required by High Court Rule 5.17(2). Mr Robinson also bears the onus of proving the elements of the tort (as discussed below). One difficulty for Mr Robinson in this regard is that he did not advance any evidence himself as to many of these matters (for example to demonstrate the alleged statements were untrue). Rather the evidence to support much of this cause of action is limited to a range of questions (often in overly broad and unspecified terms) put to Mr Freakley in cross-examination.
Elements of injurious falsehood
[77] Injurious falsehood is an economic tort that has some similarities to defamation. Perhaps the paradigmatic summary is given by Bowen LJ in the Court of Appeal decision Ratcliffe v Evans:26
That an action will lie for written or oral falsehoods, not actionable per se nor even defamatory, where they are maliciously published, where they are calculated in the ordinary course of things to produce, and where they do produce, actual damage, is established law. Such an action is not one of libel or of slander, but an action on the case for damage wilfully and intentionally done without just occasion or excuse, analogous to an action for slander of title. To support it, actual damage must be shewn, for it is an action which only lies in respect of such damage as has actually occurred.
[78] The tort is rare, and has received little discussion in New Zealand since the early 1900s,27 although its elements were recently stated by Kós P in the Court of Appeal:28
The other focus of appeal is the High Court’s approach to the injurious falsehood claim. The essential elements of that tort are (1) a false statement, (2) published maliciously, (3) to a third person (4) with damage resulting.
[79] The tort has received greater discussion and development in Australia. White J, in the Supreme Court of New South Wales, helpfully summarised the position in that jurisdiction:29
- The elements of the tort of injurious falsehood were considered by the High Court in Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388. All members of the Court were agreed that a necessary element of the tort is that the defendant publish a statement which is false. There was no unanimity on the second element. The false statement must concern “the plaintiff's goods or business” (per Gummow J at [52]) or “the plaintiff or its property” (per Kirby J at [114]) or be made in reference to “the [plaintiff], its property
26 Ratcliffe v Evans [1892] 2 QB 524 (CA) at 527.
27 See Jorgensen v Jaggard [1917] GLR 68 (SC); Taylor v Hyde [1918] NZGazLawRp 51; [1918] NZLR 279 (SC). More recently it was considered by Moore J in Zorb Ltd v Akers [2014] NZHC 1756, [2014] NZCCLR 35 and also by the Court of Appeal in BDM Grange Ltd v Trimex Pty Ltd [2017] NZCA 12, [2017] NZCCLR 11.
29 DHR International, Inc v Challis [2015] NSWSC 1567.
or business” (per Hayne J at [154]) or concern “the plaintiff or his or her property” (per Callinan J at [192]).
[31] Again unlike in defamation, in injurious falsehood malice is also an essential element of the cause of action, to be proved by the plaintiff. While the notion of ‘malice’ in the context of this tort is not easy to define ... it is a question of motive, intention or state of mind and it involves the use of an occasion for some indirect purpose or indirect motive such as to cause injury to another person. ... The English Court of Appeal has said that the criteria for malice in injurious falsehood are the same as at common law for libel and slander. ... Its content has been variously described as ‘an intent to injure another without just cause or excuse’ or ‘some indirect, dishonest or improper motive’, ... or ‘a purpose or motive that is foreign to the occasion and actuates the making of the statement’.
... It involves that the statement was made mala fide or with a lack of good faith. In this context, while a person who acts in good faith is not liable ... malice may exist without an actual intention to injure.
[32] As motive must often be inferred from what the defendant did or said or knew, malice is commonly proved by inference ... Malice may be inferred from the ‘grossness and falsity of the assertions and the cavalier way in which they were expressed’ ... Proof that the defendant knew that a statement was untrue is ordinarily conclusive evidence that its publication was actuated by an improper motive. ... On the other hand, mere lack of affirmative belief in truth is insufficient of itself to establish malice. ... But malice can be inferred not only where the false publication was made with knowledge of its falsity, but also where it was made with reckless indifference as to whether it was true or false...
[Emphasis added, citations omitted from AMI
Australia Holdings Pty
Ltd].
[80] In relation to the last element, I note that s 5 of the Defamation Act 1992 provides that:
In proceedings for slander of title, slander of goods, or other malicious falsehood, it is not necessary to allege or prove special damage if the publication of the matter that is the subject of the proceedings is likely to cause pecuniary loss to the plaintiff.
[Emphasis added]
[81] As the authors of The Law of Torts in New Zealand note, in cases where the statutory test of “likely to cause pecuniary loss” is not satisfied, a plaintiff may still succeed if able to show actual loss having been caused from the making of the false statement.30
[82] I examine each of Mr Robinson’s pleaded instances of malicious and false statements by reference to the elements of the tort set out above.
Analysis – first set of statements
[83] The first set of pleaded statements is that Mr Freakley made malicious false statements to the police when securing the trespass order, by saying Mr Robinson had no right to be at WHEL’s premises, that the office block did not belong to Mr Robinson, and that Mr Robinson was not rightfully a director of WHEL. It is not clear on the pleadings, nor was it made clear at the hearing, which trespass order or notice is referred to in Mr Robinson’s pleading. Given it was only the second trespass order in relation to which any action was taken by the police, I proceed on the basis Mr Robinson refers in this context to the second trespass notice of November 2012.
[84] Given my findings in relation to Mr Robinson’s contractual claim, on the assumption Mr Freakley told the police that Mr Robinson had no right to be at the premises and that he was not rightfully a director of WHEL, those statements were not false, nor were they made maliciously by Mr Freakley. Rather, they reflected his view and belief at the time that Mr Robinson had transferred his shareholding to him on an absolute basis and was no longer a director of WHEL. Indeed, at the time of the
30 Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) at 15.3.03(4). Examples given are the inability to sell the slandered property; or consequential loss such as the cost of correcting the falsehood.
trespass notice, Mr Robinson was not a director of WHEL. Any such statement to that effect was factually correct.
[85] The position in relation to the office block is less clear. It had certainly been agreed that for the purposes of calculating the purchase price of Mr Robinson’s 500 shares, the office block was to be “owned” by Mr Robinson and would be excluded from WHEL’s assets as a result. Given this agreement, the settled value of the office block ($22,222.22) was deducted from the price of Mr Robinson’s shares. Mr Freakley also accepts he agreed Mr Robinson could temporarily reside in the office block pending a reconciliation with his wife. The only evidence at the hearing was that by the time of the November 2012 trespass notice, Mr Robinson had moved back in with his wife.
[86] How these arrangements translate into formal ownership of the office block going forward is less clear. There was no evidence or suggestion WHEL would need to lease the office block from Mr Robinson for the purposes of its ongoing operations. Nor was there any evidence of a transfer of title in the office block to Mr Robinson. It evidently remained and remains on WHEL’s books. It may be that the agreement Mr Robinson would “own” the office block was for the purpose of calculating the price of his shares only, but it was to continue to be on WHEL’s books and thus available for WHEL’s use, but with Mr Robinson able to use it for residential accommodation pending a reconciliation with his wife.
[87] There was no specific evidence that Mr Freakley told the police the office block was not Mr Robinson’s. He accepts he did not tell police that Mr Robinson “owned” the office block, but told them it was in WHEL’s books. The latter was strictly correct. While a representation can come about by a “half-truth”, given the unclear position as to how any ongoing “ownership” of the office block by Mr Robinson was actually to be effected, I do not consider this aspect of Mr Robinson’s third cause of action to be made out. I am not satisfied that the pleaded representation was in fact made; or that any statement regarding the office block remaining on WHEL’s books was untrue. Further it is evident that Mr Robinson’s purpose in returning to WHEL’s premises in November 2012 was not to reside in the office block, but rather to assume control of WHEL for the ensuing 12 months. Mr Freakley no doubt genuinely believed at that
time that Mr Robinson had no authority to be at WHEL’s premises for that purpose. Given this, even if the police had been aware that there was some arrangement for Mr Robinson to use the office block as a temporary residence pending reconciliation with his wife, it is not clear that a different outcome would have eventuated in relation to the trespass notice.
Analysis – second set of statements
[88] The second set of pleaded statements is that Mr Freakley made (unspecified) malicious and false statements concerning Mr Robinson when writing to his ex-wife (Mrs Julie Gilbert) on 26 March 2012.
[89] Mr Freakley’s letter to his ex-wife was produced in evidence at the hearing. Mr Freakley and his ex-wife were the mortgagees under the mortgage granted from Robinson Group Ltd to secure that company’s borrowings from Mr Freakley.
[90] In summary, Mr Freakley’s (two page, handwritten) letter to Mrs Gilbert was to inquire of Mrs Gilbert as to what she wanted to do in relation to Mr Robinson’s quarry. It set out several options in that regard, for example, a mortgagee sale or trying to get the quarry operational again. In relation to the latter option, Mr Freakley stated that he had “no idea” of the costs of that option, as “J/R has stripped out some of the equipment”. Mr Freakley went on to state that:
On my reckoning J/R has taken/used in excess of 200K in the last year: New motor on boat 15K at least
Shipping 8K
Loader removed from Quarry 130K Shipping 10-12K;
Steel shipped to Vanuatu in WHE name $2000 rest still there; 26,000 paid in cash in last 5 months;
10,000 in wallet when picked up at airport.
Plus has been able to make payments to banks or family trust of some
$11,000 per month.
[91] Mr Freakley was cross-examined by Mr Robinson about some of these statements. He accepted he had no written evidence in relation to the new boat motor. Nevertheless, there was no evidence advanced by Mr Robinson that the statement was false. Mr Robinson also did not take issue with the suggestion that a loader had been removed from the quarry and shipped to Vanuatu, but put it to Mr Freakley that he had no evidence that Mr Robinson had not first tried to sell the loader in New Zealand, or that it had not been sold to a person in Vanuatu. Mr Freakley accepted he did not know anything in that regard. However, Mr Robinson again did not present any evidence that he had tried to sell the loader in New Zealand, or that it had been sold to a party in Vanuatu.
[92] Mr Freakley also accepted he did not have any documentary or other evidence that Mr Robinson had been paid in cash for steel, though he did state he had invoices in relation to these matters. Mr Robinson did not challenge the statement that he had
$10,000 in cash with him when he was arrested as he boarded his flight to Vanuatu, but rather asked Mr Freakley whether he knew what that cash was for. Mr Freakley said he did not know. Mr Robinson did not himself give any evidence in relation to the $10,000. In terms of the $11,000 per month in payments, Mr Freakley said Mr Robinson had told Mr Freakley that. Mr Freakley was also asked if he discussed these matters with a Mr Bruce Bowyer, to which Mr Freakley responded that he did not know, and that he was sure that he had not gone into all of these matters with him. I return to Mr Bowyer’s evidence later in this judgment, as it is the subject of the fourth set of pleaded representations said to have been made by Mr Freakley.
[93] In terms of the elements of injurious falsehood, it is by no means clear that the statements made by Mr Freakley in his letter to his ex-wife are false. Ultimately, as plaintiff, it is for Mr Robinson to demonstrate their falsity. Even assuming for present purposes that they were false, however, I am not satisfied Mr Freakley made the statements maliciously. There is no evidence that Mr Freakley knew the statements were untrue when he made them. And while a reckless disregard as to the truth of a statement can give rise to an inference of malice, I do not consider that to be the case here. The statements were made in a letter to Mr Freakley’s ex-wife and joint mortgagee in the context of trying to assess what they should do, as mortgagees, in relation to the Robinson Group Ltd quarry. The statements were made in the context
and for the purpose of assessing various options, including recommencing quarry operations and the costs associated with that. On that basis, I do not consider Mr Freakley made the statements for some indirect purpose or motive, namely to cause actual injury to Mr Robinson.
Analysis – third set of statements
[94] The third set of pleaded statements is that Mr Freakley made malicious and false statements to the District Court on 11 February 2013 (being the date of the hearing before Davis J of the wilful trespass charge against Mr Robinson), by saying that he was the 100 per cent owner and director of WHEL, that Mr Robinson had no authority to be in the WHEL office, that he could not recall any agreement letting Mr Robinson re-enter WHEL after 12 months, and by denying that he and Mr Robinson had agreed that Mr Robinson would have the right to retake control over WHEL after 12 months.31
[95] Given my findings in relation to Mr Robinson’s contractual claim, this aspect of Mr Robinson’s third cause of action must fail. The notes of evidence taken before Judge Davis were produced at the hearing before me. It was correct that, at the time of that hearing, Mr Freakley was the 100 per cent owner of WHEL and its only director, and that as far as Mr Freakley was concerned, he had not entered into an agreement to let Mr Robinson re-enter or retake control of WHEL after 12 months. Further, there was no evidence that Mr Freakley knew the statements to be untrue at the time he made them, and on the contrary, I accept his evidence that he did not believe he had entered into the contractual arrangements with Mr Robinson. For similar reasons, any statement by Mr Freakley that Mr Robinson had no authority to be in the office in November 2012 simply reflected Mr Freakley’s own view of the position as between himself and Mr Robinson at that time. There is no evidence that Mr Freakley knew this to be untrue when he gave evidence, given Mr Robinson’s purpose for being in the WHEL office in November 2012 was to retake control of WHEL, rather than intending to take up residence.
31 Mr Freakley did not dispute that the tort of injurious falsehood can apply to statements given in evidence in a criminal court proceeding. I proceed, without considering that matter further, on the assumption it can.
Analysis – fourth set of statements
[96] The final set of pleaded statements is that Mr Freakley made malicious and false statements to members within the Whangarei Heads community to cause harm to Mr Robinson, as evidenced by statements to Mr Bruce Bowyer. Mr Bowyer provided a brief of evidence in this matter, though did not give evidence due to ill health. Mr Vautier for Mr Freakley confirmed Mr Bowyer’s brief of evidence could be taken as read.
[97] Mr Bowyer said the following:
Over the ensuing period up to date, I have overheard conversations either with other members of the Club or myself, Vic and some of his close associates making many derogatory remarks with specific references as to how untrustworthy, dishonest, and a user of other people John is. These references include comments on removing assets belonging to Whangarei Heads Enterprises and various other statements regarding Vic’s view on aspects of business transactions between the two parties.
[98] Given the hopelessly broad terms in which Mr Bowyer’s evidence is framed, and the complete lack of particularisation in Mr Robinson’s pleadings as to the statements said to have been made by Mr Freakley (as well as the basis for alleging malice), it is simply not possible to analyse this aspect of Mr Robinson’s claim in any meaningful way:
(a) To the extent any statements concerning the removal of assets from WHEL related to Mr Robinson’s removal and hiding of WHEL equipment in March 2012, those statements would have been true. Mr Robinson does not dispute that he removed assets from WEHL at that time.
(b) Further, in cross-examination, Mr Robinson put to Mr Freakley that he had told third parties that Mr Robinson had either stolen or removed a generator from WHEL’s yard, to which Mr Freakley replied “true, you had”. Mr Freakley did not accept or give evidence that he had made such statements to third parties, and no other evidence was called to
demonstrate he had.32 Nor was there any evidence that Mr Robinson had not removed a generator from WHEL’s yard in any event.
(c) Mr Freakley accepts that he had told people that Mr Robinson had shipped steel overseas and taken cash for it and not paid (presumably WHEL) for it, and that Mr Robinson had removed a loader overseas without looking to sell it in New Zealand. However, no further evidence or details were presented in relation to these matters, in order for the Court to form a view on whether the statements were false; even if so, the circumstances in which they were made; and whether Mr Freakley made them with malice.
(d) Mr Freakley also accepts he told people that Mr Robinson was being investigated by the Accident Compensation Commission (“ACC”) for fraud. Again, it is not clear whether Mr Bowyer’s evidence relates to this matter. Mr Freakley accepts he told one person about this, given Mr Robinson was working for them and being paid while receiving ACC payments. Mr Freakley said he didn’t consider this “was right”. When challenged as to the basis upon which he made such statements, Mr Freakley said he had been approached by a private investigator working for ACC who said he was investigating Mr Robinson for fraud. Mr Freakley said the investigator spent a lot of time with him going over old jobs carried out by Mr Robinson and Mr Freakley, and that Mr Freakley had worked with the investigator to prepare a lengthy report in that regard. While the investigator did not give evidence (such that Mr Freakley’s evidence of what he was told by the investigator is hearsay and not admissible for the truth of its contents), Mr Freakley’s evidence of the fact he was told by the investigator that Mr Robinson was being investigated by ACC for fraud is relevant and admissible to Mr Freakley’s state of mind when making any such statement to a third party. That evidence suggests Mr Freakley did not know at the time that what he was saying was untrue (assuming for present purposes that
32 It is unclear whether Mr Bowyer’s evidence relates to this matter.
to be the case).33 Given the context to Mr Freakley’s statements, I am not satisfied he made them maliciously.
[99] Accordingly, while there is no doubt Mr Freakley made a number of comments to others concerning Mr Robinson, I do not consider Mr Robinson has proved that each of Mr Freakley’s comments was false, or even if they were, that Mr Freakley acted maliciously in making them.34 It was unwise for Mr Freakley to have engaged in the conduct and conversations set out in Mr Bowyer’s (unchallenged) evidence. Despite this, neither Mr Bowyer’s evidence nor the evidence at trial demonstrates Mr Freakley committed the tort of injurious falsehood.
[100] Mr Robinson’s third cause of action is accordingly dismissed.
Conclusion and costs
[101] For the reasons set out in this judgment, I dismiss Mr Robinson’s contract, deceit and injurious falsehood causes of action.
[102] By way of concluding observations, I observe that Mr Robinson and Mr Freakley’s falling out in 2012 has obviously caused serious and likely irreparable damage between the parties. These events have also led to a significant number of interrelated court proceedings. I have no doubt Mr Robinson feels genuinely wronged by events of 2012. However, given the passage of time and the findings now made in a number of substantive judgments, it is hoped that the parties can draw a line under these unfortunate events. Moreover, any continued litigation arising out of the same factual matters may be susceptible to claims of res judicata, issue estoppel or abuse of process on a Henderson v Henderson basis.35 Should Mr \ Robinson contemplate commencing further litigation in relation to events the subject of this judgment, I
33 For the record, I make it clear that there was no further evidence on this matter, and nothing said in this part of my judgment is to be taken as an acceptance that Mr Robinson was investigated by ACC for fraud, or that Mr Robinson committed fraud.
34 Had I found these elements made out, there may have been difficulty in relation to some aspects of the damages sought by Mr Robinson, and his pleading in that regard; see BDM Grange Ltd v Trimex Pty Ltd [2017] NZCA 12, [2017] NZCCLR 11 at [82] to [90] for a general discussion of damages in an injurious falsehood claim.
35 Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 114[1843] EngR 917; , (1843) 67 ER 313 at 319 (Ch).
would urge him to take legal advice before doing so, to ensure he does not fall foul of any of these principles and incur unnecessary costs as a result.
[103] On the question of costs, given Mr Robinson’s claims have been dismissed, my preliminary view is that costs ought to follow the event in the ordinary way, on a 2B basis. If the parties are unable to agree costs, Mr Freakley may file a memorandum as to costs within 15 working days of this judgment, and Mr Robinson may file a memorandum in response within a further 10 working days. The memoranda are not to exceed seven pages in length. I will then determine costs on the papers.
[104] As noted at the outset of this judgment, while WEHL is named as the first defendant to these proceedings, none of Mr Robinson’s causes of action were directed at it. Nevertheless, it is difficult to see how WHEL, having the same solicitor/counsel as Mr Freakley, will have incurred any, or any substantial, costs that would not have been incurred by Mr Freakley in any event. On that basis, it would seem appropriate that there is only one claim for costs by the defendants. If WHEL/Mr Freakley take a different view, that will need to be addressed in their costs memorandum.
Fitzgerald J
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