Ipsofactoj.com: International Cases [2000] Part 5 Case 5 [NZCA]




- vs -





28 JUNE 2000


Gault J

  1. Over the period between November 1993 and May 1995 Mr. Lindsay invested in total over $2.3 m in acquiring shares in a company Escalator Advertising Ltd ("EAL"). The shares turned out to be virtually worthless. In this proceeding he has sought to recover his losses. He was unsuccessful in the High Court and appeals against the judgment of Randerson J delivered on 17 September 1999.

  2. The circumstances in which the shares were acquired are interlinked with the steps taken by Mr. Lindsay to withdraw from involvement in the company Fruehauf Pacific Ltd ("FPL") and dispose of his shareholding in that company. Mr. Lindsay was the managing director and held 40 percent of the shares. The other 60 percent was owned by Mr. Domett, the son of the company’s founder. By 1993 Mr. Domett had withdrawn from active participation in the company and he and Mr. Lindsay were looking for ways to quit their interests. They engaged Milloy, Reid, Tong and Co Ltd which later became Milloy, Reid, Wong and Co Ltd ("MRW") to find a buyer for their shares. The first, second and third respondents are the principals of MRW. The first two were also directors of EAL. MRW describes itself as a merchant and investment bank. It acquires shares in private and public companies to provide venture capital for new businesses, raises debt and equity capital and undertakes business valuations.

  3. Mr. Lindsay made five separate acquisitions of EAL shares. The circumstances of each can be briefly summarised.

  4. In the course of discussing the sale of FPL with Mr. Milloy, Mr. Lindsay noticed information concerning EAL which was a new venture company formed to develop and commercialise a concept for the display of advertising and safety messages on the steps of escalators. Mr. Lindsay was impressed with this and considered that it would be a profitable venture. In October 1993 Mr. Lindsay and Mr. Domett signed a letter giving MRW mandate to value their FPL shares and find a purchaser. On 16 November 1993 Mr. Milloy visited the Rotorua and Feilding plants of FPL. Mr. Lindsay used the occasion to discuss the EAL concept with Mr. Milloy and asked to be provided with information. The Lindsays were supplied with promotional videos and publicity material. Mr. Lindsay was particularly impressed that institutional investors such as AMP and Prudential had invested in the company.

  5. The information provided to the Lindsays showed that at April 1993 MRW held 40 percent of the share capital of EAL, the inventors about 50 percent, with the remaining 10 percent in private hands. The Judge was satisfied that Mr. Lindsay well knew that MRW was a substantial shareholder and was responsible for the investment strategy outlined in the material. Information given to the Lindsays also outlined cash flows and projected sales and a statement of business risks facing the company, including the slow process of obtaining patent protection.

  6. On 29 November 1993 Mr. Lindsay bought $500,000 worth of shares in EAL (the first acquisition). He stated that he was not aware the shares were sold by MRW because the name of the transferor on the share transfer was blank. He also said he was led to believe at the time that there would be a public float of EAL shares in June 1994.

  7. In April 1994 in a notice of an extra-ordinary general meeting the shareholders in EAL were informed of deferral of the target date for a public float to the last quarter of 1994. At the meeting it was resolved to increase the capital of the company to $500,000 divided into 50 m shares of one cent each and to approve a thirty-for-one cash issue. The directors were also authorised to offer a private placement of $10 m worth of shares at a price of $2.10 (representing a premium of $2.09 per share). The material containing the offer of private placement made clear it was open only to "habitual investors" within the Securities Legislation. Mr. Lindsay was anxious to increase his investment in the company to 1 m shares. In addition to taking up his entitlement on the share issue at a cost of $7,378 he sought to purchase additional shares at the price offered on the private placement. By arrangement with Mr. Milloy he purchased a further 262,200 shares at the price of $2.10 per share. Mr. Lindsay said he believed these shares were obtained from the private placement whereas in fact they were sold to him by MRW, though again the share transfer form did not show the name of the transferor.

  8. By May 1994 negotiations had ended with the last potential purchaser of the FPL shares. During June Mr. Lindsay had discussions with MRW with a view to that company purchasing an interest in FPL. It was agreed that MRW or a nominee would acquire 80 percent of the total shareholding of FPL comprising Mr. Domett’s 60 percent and a further 20 percent from Mr. Lindsay. In addition Mr. Lindsay would sell his 40 percent share in the two companies that owned the land and buildings used by FPL. MRW agreed to pay Mr. Lindsay a total consideration of $1,376,000 to be satisfied by a payment of $300,000 in cash and the balance in EAL shares at an attributed price of $2.50. At that time, EAL shares were regarded as generally worth $2.10 but it was expected that once listed on the share market their value would rise to $3 or more. The arrangement was embodied in a preliminary "share swap" agreement dated 5 July 1994. The agreement was conditional on a number of matters. In due course this led to the fourth acquisition of EAL shares by Mr. Lindsay pursuant to the swap transaction which was finalised on 2 December 1994 by which date there still had been no public float of EAL shares.

  9. On 9 December CS First Boston, the duly appointed organising broker for the public float, declined to manage the float in the absence of demonstrated commercial development of the technology. Other brokers were appointed, but after investigation they advised on 1 February 1995 that a public float would not be possible given the strained cash position of EAL, a number of unresolved issues and the business risks associated with the company. Mr. Lindsay attended the annual general meeting on 31 March 1995 at which EAL’s financial position was evident. In early May of the same year Mr. Lindsay subscribed for his full entitlement of over one million further shares in EAL in a two for three share issue at a cost of $262,146 (the fifth acquisition). He said that at that stage he had no choice but to preserve his position although he knew of the financial situation of the company.

  10. Randerson J dealt with the facts at length in his judgment. He identified four principal matters focussed on at the trial. They were raised by allegations that:

    1. The defendants falsely represented that EAL would be publicly listed on the New Zealand stock exchange at a date stated at the time of the first acquisition to be by June 1994; at the time of the second and third acquisitions, to be, "later this year"; and at the time of the fourth acquisition, to be in the first quarter of 1995. In respect of this allegation, Mr. Lindsay says he contemplated being able to dispose of his shares in EAL at a profit upon the public listing of the company.

    2. The defendants failed to warn Mr. Lindsay of the speculative nature of investments and failed to advise him to obtain independent advice.

    3. In respect of the first and third acquisitions, the defendants failed to disclose to Mr. Lindsay that the shares he was acquiring were owned by MRW.

    4. Prior to the fourth acquisition, the defendants failed to disclose to Mr. Lindsay the true financial position of EAL and its prospects of successfully achieving the public share float then in contemplation.

  11. The legal duties alleged to underpin these allegations were identified in numerous causes of action pleaded in the third amended statement of claim. There were allegations of duties based on fiduciary relationship, pre-contractual misrepresentations, negligence and the Fair Trading Act 1986. Allegations of breaches of the Securities Act 1978 were not pursued.

  12. The Judge reviewed the extensive written and visual material made available to Mr. and Mrs. Lindsay prior to their first purchase of shares. He found this indicative of the level of knowledge they should be taken as having at the material time. He considered the oral evidence he had heard and made the credibility finding that where the evidence of Mr. and Mrs. Lindsay was in conflict with that of Mr. Milloy he preferred that given by Mr. Milloy.

  13. Material findings made by the Judge in respect of the first acquisition were, that Mr. and Mrs. Lindsay were well aware of the speculative nature of the investment; that Mr. Milloy and Dr Wong advised them that they should obtain independent advice; that Mr. Morris an accountant consulted by Mr. Lindsay for his advice on the sale of FPL cautioned Mr. Lindsay against putting "all his eggs in one basket"; that at November 1993 Mr. Milloy had not assumed any role as Mr. Lindsay’s investment adviser; that it was possible that there may have been some confusion in Mr. Lindsay’s mind as to the vendor of the shares in the first acquisition though Mr. Milloy did not explicitly state that MRW was the vendor but, in any event, there was no misrepresentation or misleading or deceptive conduct in that respect and, even if there had been, it would not have been material to Mr. Lindsay’s decision to invest; that Mr. Lindsay was not given any assurance that EAL would be publicly listed by June 1994 — the statements reflected a goal or target rather than a definitive promise; and that Mr. Lindsay’s decision to invest was his own and was not induced by any material misrepresentation.

  14. Randerson’s J material findings in respect of the second and third acquisitions made in May 1994 were, that by then Mr. Lindsay had been informed that the public float target date had been deferred to late 1994 and would be managed by CS First Boston; that there was a factually incorrect statement in a letter from Mr. Milloy to Mr. Lindsay dated 16 May 1994 in stating that the board of EAL had determined to proceed to a public listing but it substantially represented the directors’ intentions; that Mr. Lindsay was aware that the 262,200 shares (as distinct from his entitlement on the thirty for one share split) were acquired from MRW and not by way of the private placement; that by then, although Mr. Milloy and MRW were not paid advisers, their relationship with Mr. Lindsay went further than that of vendor and purchaser in that considerable trust was reposed in Mr. Milloy to his knowledge; and that the dominating factor in Mr. Lindsay’s decision to proceed was the prospect of realising substantial profits.

  15. At the time of completion of the fourth acquisition on 2 December 1994 the share swap transaction, first agreed in a preliminary way in July, was brought to execution. That was after re-negotiation in light of lower than expected FPL earnings and after Mr. Domett’s shares had been acquired by Mr. Lindsay with the assistance of MRW. In this context Mr. Lindsay was advised in writing by solicitors acting both for him and for MRW that he should obtain independent advice with regard to the share swap transaction. Preparations towards a public float near the end of the year had proceeded but in September CS First Boston recommended that it be deferred until there could be demonstrated a sufficient record of successful escalator conversions providing an income stream for EAL. This presented cash flow problems which needed to be addressed. Late in November shareholders were advised that the target date for the float had been moved to the first quarter of 1995. Against this background the share swap transaction was settled.

  16. The Judge carefully reviewed the evidence of the state of mind of the EAL directors (including Mr. Milloy and Mr. Reid) at 2 December 1994. He found that they intended and expected the public float to occur in February 1995 or if there was to be a further delay it would not be lengthy. He also found that at that time Mr. Lindsay was not made aware of the delicate position with regard to the share float (though he knew it had been deferred). He did not know of the pre-conditions for CS First Boston’s participation nor of the unlikelihood that they would be satisfied in time to achieve the February target date.

  17. Randerson J considered that by 2 December 1994 the relationship between Mr. Lindsay and MRW had developed to the stage where obligations of trust and confidence had arisen. The Judge held, however, that even if Mr. Milloy and MRW had disclosed their knowledge of the progress of the share float, Mr. Lindsay would still have proceeded with the share swap transaction. He expressly stated that he reached that conclusion even if the onus of proof on the point was on the defendant and referred to the decision of this Court in Gilbert v Shanahan [1998] 3 NZLR 528.

  18. After his lengthy review of the evidence the Judge summarised his principal factual findings towards the end of his judgment in the following terms:

    There can be no question that Mr. Lindsay’s investments in EAL have proved to be disastrous. By the same token, MRW’s investment in FPL has not proceeded according to plan and substantial losses have been incurred in each year since 1994. However, my main factual conclusions are:


    Mr. Lindsay was an experienced businessman although lacking sophisticated knowledge in investment matters. At the time of the first acquisition, neither Mr. Milloy nor MRW was acting as Mr. Lindsay’s financial adviser. Mr. Milloy offered Mr. Lindsay the opportunity to invest in EAL after interest was shown by Mr. Lindsay. None of the alleged misrepresentations is made out and there is no evidence of misleading or deceptive conduct. Mr. Lindsay was informed in writing that EAL would be managed with a view to listing on the New Zealand stock exchange by June 1994 and Mr. Milloy’s verbal advice was consistent with that. This statement did not and could not amount to a promise or representation that the float would occur by that date. Mr. Lindsay and his wife were well aware of the speculative nature of the investment and declined to take independent advice although advised to do so by MRW. Mr. Lindsay was restrained by his wife from investing a larger sum at that time and was warned by his accountant not to "put all his eggs in one basket". The principal factors influencing his investment at that time were the engineering and technological aspects of the EIS system, the written materials provided to him and the fact that major institutions had invested in EAL.


    By the time of the second and third investments, Mr. Lindsay placed substantial trust and confidence in Mr. Milloy. They were beginning to form a close business relationship by this time and Mr. Milloy was aware of the confidence Mr. Lindsay placed in him. However, neither Mr. Milloy nor MRW were ever paid for or instructed to provide investment advice to Mr. Lindsay and did not do so. There is no evidence of any misrepresentation or misleading or deceptive conduct at this time. By this stage, Mr. Lindsay was aware the share float had been deferred until late 1994, but made his further investment nevertheless. If Mr. Lindsay were under any misapprehension about the origin of the shares as alleged either at this time or at the time of the first acquisition, it was not material to his decision to purchase which would have occurred in any event. The overwhelming factor influencing his decision to make these further investments was the trebling in value of his initial investment made only six months before, and the prospect of further substantial profits. During this period, institutions were continuing to invest substantial sums in EAL and there is nothing to suggest that EAL was anything other than a good prospect, although carrying with it the risks necessarily associated with a new and untried venture.


    Assuming there was an obligation to disclose relevant information about progress with the share float at the time of the fourth acquisition, there was a failure by MRW to disclose the pre-conditions imposed by CS First Boston on their support for the float and the tight timetable which EAL faced in achieving sufficient escalator conversions in time to permit a float in February 1995. However, Mr. Lindsay would have proceeded with the share swap agreement on 2 December 1994 even if those matters had been disclosed to him. Although not legally bound to proceed with the transaction on 2 December, he had effectively committed himself to do so at the time of the preliminary share swap agreement on 5 July 1994 and his subsequent promise to Mr. Domett to settle the transaction by late November. There was nothing on 2 December which led MRW to believe the share float would not proceed or would be significantly delayed beyond the then known target of the first quarter of 1995. There is no evidence of any other breach of duty at that time.


    There is no evidence of any misrepresentation or misleading or deceptive conduct at the time of the fifth acquisition which was entered into voluntarily by Mr. Lindsay in the full knowledge of the then state of EAL.

  19. Although his factual findings were determinative, the Judge went on to set out briefly his conclusions on the legal duties on the respondents. He considered that had he found misleading and deceptive conduct within s 9 Fair Trading Act which induced any of the acquisitions he would have attached liability to Mr. Milloy but not Dr Wong or Mr. Reid. In respect of the fourth acquisition the Judge referred to authorities recognising that silence can amount to misleading or deceptive conduct within s 9 where there is an obligation to disclose facts. He said:

    For the purpose of deciding this case, I have assumed there was a duty on the part of MRW and Mr. Milloy to disclose to Mr. Lindsay the facts within their possession with regard to the share float on 2 December 1994. Had it been necessary to make an affirmative decision on that point, I would have decided it in favour of the plaintiff. To a material extent, my conclusions in that respect overlap with my findings with regard to fiduciary obligations. I have concluded there was a positive obligation on MRW and Mr. Milloy to disclose the relevant circumstances at that time for these reasons.

  20. With reference to relevant authorities the Judge made the following finding on the allegation of breach of fiduciary duty.

    For the reasons already indicated, I am of the view that a fiduciary duty did arise in the circumstances of this case which required disclosure of the material information in Mr. Milloy’s possession regarding the share float. The failure to disclose the information would have given rise to an actionable claim by the plaintiff but for my finding that he would have proceeded in any event.

  21. In this Court the notice of grounds of appeal listed some 19 grounds. Most of them attacked the findings of the Judge on matters of fact. When presenting his oral submissions Mr. Dalkie acknowledged the difficulty on appeal in overturning findings of fact, particularly those based on the assessment of the witnesses by the trial Judge. Therefore, although he maintained with greater or less force all but one of the notified grounds, he put at the forefront of his argument a legal challenge to the Judge’s approach to s 9 of the Fair Trading Act.

  22. It was submitted that the Judge was wrong in law to reject the claims for remedies for misleading and deceptive conduct on the ground that Mr. Lindsay would have made the acquisitions in any event. The argument was that the Judge’s approach is inconsistent with the established proposition that it is enough to contravene s 9 that misleading or deceptive conduct played a part (even a minor part) in inducing the recipient to enter into the contract. Reliance was placed on Goldsbro v Walker [1993] 1 NZLR 394, 401 and Sutton v A J Thompson Pty Ltd (in liquidation) (1987) ATPR 40-789. It was accepted from the latter case, however, that ".... if a person is so determined to enter into a contract that he is not in truth influenced by some false representation made to him, he clearly has no case" (p 48, 607).

  23. The elements of contravention of s 9 were formulated in the decision of this Court in AMP Finance Ltd v Heaven (1997) 8 TCLR 144, 152 as conduct in trade capable of misleading, which has misled the recipient in circumstances in which it was reasonable to have been misled. It is well recognised that in certain circumstances silence can mislead or deceive as where statements, conduct or circumstances convey incomplete information which is taken reasonably as complete: Unilever NZ Ltd v Cerebos Gregg’s Ltd (1994) 6 TCLR 187, 192. In the present case the Judge found that the fiduciary duty upon MRW and Mr. Milloy to disclose to Mr. Lindsay the full facts with regard to the share float as at 2 December 1994 meant that his conduct in settling the share swap transaction without disclosure to Mr. Lindsay who understood the situation differently constituted misleading and deceptive conduct.

  24. Mr. Dalkie can have no criticism of the Judge’s reasoning on this point. He held the requirements for contravention of s 9 were met in respect of the fourth acquisition. It is on the application of the remedies provision (s 43) that his criticism is really focussed. That provides for the orders the Court may make where a person "has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes .... a contravention [of s 9]". Plainly the words "by conduct" call for a causal link between the contravening conduct and the loss or damage. As it was put by Richardson J in Goldsbro v Walker (p 401):

    It is sufficient that there is a clear nexus between the conduct and the loss or damage suffered.

    Two sentences further on, the same Judge said:

    The representation need not be the sole factor influencing the person affected by the conduct.

  25. That goes to the heart of this ground of appeal. Counsel’s argument, in effect, is that by finding Mr. Lindsay would have made the acquisitions anyway, the Judge has not answered the claim because the misleading conduct may have played a part in influencing the acquisitions. If it did play a part, it was submitted, Mr. Lindsay is entitled to succeed in full.

  26. It can be said immediately that s 43 is not to be construed so inflexibly as to require an order for the payment of the full amount of the loss or damage where the contravening conduct played only a minor part in causing the loss. That is clear from the judgments in Goldsbro v Walker (p 399 per Cooke P, p 404 per Richardson J, p 406 per Hardie Boys J).

  27. But reverting to Mr. Dalkie’s principal point, we find no difficulty in reading Randerson J’s judgment as excluding the misleading and deceptive conduct he found as a cause, even a minor cause, of Mr. Lindsay’s loss. His findings of fact were that even if full disclosure had been made prior to the third and fourth acquisitions Mr. Lindsay still would have proceeded. That means the failure to disclose was not causative of the loss. MRL and Mr. Milloy, on the Judge’s findings, made a statement that was not entirely accurate or engaged in conduct likely to mislead or deceive, but Mr. Lindsay was not by that conduct misled or deceived into making the particular acquisition. Accordingly, we are not convinced that the Judge erred in law in this respect.

  28. The written submissions included the contention that it was not open to the Judge, in light of the evidence, to find that Mr. Lindsay would have proceeded in any event. It was said to be an "exercise of his own" and speculative. We do not accept that. There was ample basis in the evidence for the inference drawn by the Judge. He set out in a very full judgment his assessment of the evidence bearing upon Mr. Lindsay’s motivations at the material times and the conclusion was open to him. It is, of course, a fair inference that if a misrepresentation is made and following it action is taken, the misrepresentation operated to induce the action. But that inference is not one inevitably to be drawn and, on an assessment of the evidence the Judge was entitled not to draw it, but to find as he did. That involved rejecting assertions by Mr. Lindsay, but the Judge indicated his reservations on the reliability of his evidence.

  29. At the time of the first acquisition there was evidence that Mr. Lindsay was impressed with the technology and its potential. He was impressed also that major institutions had invested in EAL. No doubt he was influenced by the intention to publicly float the shares with the prospect that those in at the beginning would realise profits on their shares. But it is difficult to accept that at that stage the timing of the proposed float was so crucial that, had the intention then been to float later in 1994 and had Mr. Lindsay been told that, and that the seller was MRW, he would not have made the first purchase.

  30. Similarly, if at the time of the second and third acquisitions Mr. Lindsay had been told not that the directors had determined to float later in the year but that they had resolved on 17 February to work towards a public float likely to be between November 1994 and June 1995, the likelihood that he would have proceeded in light of the profit expectations is high. Clearly it was open to the Judge to find that he would have done so and that full knowledge of the sources of the shares then acquired would have made no difference.

  31. By the time of the fourth acquisition on 2 December 1994 Mr. Lindsay knew from the shareholders’ newsletter of late November that the float had been deferred to the first quarter of 1995. What he did not know, and what the Judge held should have been disclosed to him was that the conditions specified by CS First Boston for supporting the float were unlikely to be met in time and that further delay would necessitate some alternate source of funding to enable EAL to continue. Had he been fully informed of the facts known to the directors and their intentions at that time Mr. Lindsay would hardly have then unwound a complex share swap transaction when the proposed float was still planned for early in the next year. That he sought to reverse it at a meeting on 6 February 1995 is not indicative of what he would have done on 2 December. The Judge’s finding was reasoned, it was based on the evidence with which he was presented and was open to him.

  32. In the course of his challenge to this finding Mr. Dalkie submitted that the Judge misconstrued the evidence. When addressing this matter the Judge said that there was no direct evidence on the point and that it, therefore, was to be determined as a matter of inference from all of the relevant facts. In particular, he said that there was no positive assertion by Mr. Lindsay that he would not have proceeded. Mr. Dalkie drew our attention to the written brief of Mr. Lindsay’s evidence in which he stated:

    By the time the share swap was completed on 19 March 1995, it was well and truly known to Milloy Reid & Wong that EAL could not list, had no hope of doing so in the future, and that the company was facing an immediate cash crisis. Had I known the true facts about the state of EAL, and its true financial position, I would not have entered into, or continued with the share swap transaction. In fact I would never have bought any shares at all. I had been lulled into a false sense of security by the very optimistic and rosy propaganda put out by EAL, and by many assurances over the months from Milloy and Reid that all was well at EAL — even if its plans were a little behind schedule.

    This is a general statement in the context of the completion of the share swap transaction in March of 1995. That is how the Judge understood it. It is clear that the Judge did not ignore the evidence as Mr. Dalkie contended. The critical date for the share swap transaction was 2 December 1994. The Judge’s finding of breach of duty by failure to disclose as at that date was favourable to Mr. Lindsay. His further finding that Mr. Lindsay would have proceeded on that date even if Mr. Milloy had disclosed to him the then position of EAL is not inconsistent with a claim that he would not have proceeded in March 1995. It is, however, inconsistent with the general statement by Mr. Lindsay that he "would never have bought any shares at all" and his statement that he would not have entered into the share swap transaction, but those were generalisations to be considered in the context of the evidence overall and were plainly coloured by hindsight. We are quite satisfied that even if the Judge had directly addressed those statements his overall assessment would have been no different.

  33. Because we are satisfied the Judge did not err in law as submitted, and because his essential findings that Mr. Lindsay would have proceeded in any event were open to him, we do not need to review the further challenges to the Judge’s factual findings. As he said, even if he had found that the respondents had conducted themselves as alleged it would have made no difference. Nevertheless in deference to the detailed argument we make the following comments on the matters particularly urged by Mr. Dalkie.

  34. It is only that which is held to have been misleading or deceptive that is considered in examining where there was a causative link to the loss claimed. Other conduct or communications not misleading or deceptive are not material. In that respect, enthusiastic presentations of EAL’s technology and opinions on its prospects, if they reflected views genuinely held, do not give rise to liability. Statements of intentions and expectations do not become misleading and deceptive conduct because they are not realised. It is the claimed representations about the timing and benefits of the public float which were the essential complaints.

  35. In his argument that the Judge wrongly assessed the evidence in various respects Mr. Dalkie took us to the documents and oral evidence which he contended should lead this Court to take the unusual course of rejecting the Judge’s findings of fact and substituting our own. We have reviewed the arguments including those developed in the detailed written submissions attacking the factual findings of the Judge based on his preference for the evidence of others, particularly Mr. Milloy over that of Mr. Lindsay. He saw and heard the witnesses. That is an advantage that cannot be disregarded. It is not the role of an appeal Court to make primary findings of fact. There are, of course, circumstances in which factual findings of trial Judges may be overruled; but the circumstances where that can extend to findings resting on the assessment by the trial Judge of the credibility of witnesses will be rare indeed.

  36. Nevertheless we have carefully considered each factual challenge. We have examined the submissions against the sequence of events, the conduct alleged to have been misleading and deceptive at the times of its occurrence, the evidence of the progress of EAL and its financing at those times and the knowledge, conduct and attitudes of Mr. Lindsay as matters developed.

  37. In relation to the first acquisition on 29 November 1993 the appellant’s case was that the Judge was wrong to find the representation that there would be a float in June 1994 did not amount to a misrepresentation giving rise to liability. There are two aspects. The first is whether there was a representation of fact or, as the Judge found, merely a statement of a target or objective. The second is whether it was, when made, misleading.

  38. The written material provided to the Lindsays prior to the acquisition said that the investment strategy included the intention to move towards a public float: "June 1994 onwards". In September 1993 MRW had advised institutional investors that EAL "will be managed with a view to listing on the New Zealand Stock Exchange by June 1994". There was no evidence Mr. Lindsay knew of this until he received identical advice after committing to the first purchase but it is relevant as showing what was intended at the time.

  39. Mr. Lindsay’s evidence was that he was told by Mr. Milloy that the shares would be listed in June 1994. In argument evidence was placed on a minute at a meeting of the Board of EAL on 17 February 1994. That reads:

    Resolved that: the directors accept the principles of working towards a public float at a date to be determined, but likely to be between November 1994 and June 1995.

    No commitment would be made to commence in any form, either standard listing, dual listing or backdoor listing, without full board ratification.

  40. It was submitted that in light of this minute, which was the first directors’ resolution on the subject of a public float, it cannot have been correct to assert before then that there would be a public float or that the company was being managed towards a public float. It was said that the only statements to that effect were in MRW’s own promotional material and they did not correspond with any recorded objective of the company. But, as the Judge pointed out, the meeting on 17 February was the first meeting of a reconstituted board with outside directors and it was not inconsistent with the resolution then passed that those responsible for the direction of the company prior to that (essentially Messrs Milloy and Reid with the chief executive Mr. Rugg) were pursuing a development strategy directed towards a public float.

  41. The Judge was entitled to find on the evidence that Mr. Milloy in November 1993 would have been unlikely to have stated categorically that there would be a float in June 1994 and that to the extent that was a target or objective it correctly reflected the intent of the company at that time.

  42. We do not accept that the Judge placed any significant weight on the form of disclaimer in the MRW material which he noted in the course of his judgment.

  43. There was also considerable emphasis on the letter written by Mr. Milloy to Mr. Lindsay on 16 May 1994 in connection with the third acquisition. That contained the statement the Judge held was factually incorrect.

    I confirm that the board of EAL has determined to proceed to a public listing of the company later this year.

    In fact there was no board resolution to that effect. The Judge considered nevertheless that the company was at that time working towards a public float later in the year. That was in accordance with the 17 February board resolution. Mr. Lindsay in his evidence chose to interpret the letter as advising that the company was determined to list later in 1994 which is not what the letter said.

  44. The inaccuracy was held by the Judge not in substance to have been misleading or deceptive and not to have operated as an inducement to complete the third acquisition because the decision was motivated by other factors. This was a conclusion he was entitled to reach.

  45. Accordingly, for the reasons given the appeal is dismissed.

  46. The respondents are entitled to costs which we fix at $5,000 together with disbursements including the reasonable costs and travel expenses of counsel approved, if necessary, by the Registrar.


Gilbert v Shanahan [1998] 3 NZLR 528; Goldsbro v Walker [1993] 1 NZLR 394; Sutton v A J Thompson Pty Ltd (in liquidation) (1987) ATPR 40-789; AMP Finance Ltd v Heaven (1997) 8 TCLR 144; Unilever NZ Ltd v Cerebos Gregg’s Ltd (1994) 6 TCLR 187


Fair Trading Act 1986: s.9, s.21, s.43


P F Dalkie for Appellant (instructed by John Langford, Wellington)
M A Gilbert and C F Cook for Respondents (Chapman Tripp Sheffield Young, Auckland)

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