IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-619 [2015] NZHC 2123

BETWEEN	DAVID ARTHUR JAQUES
Plaintiff	

AND	
VICTOR RAYMOND MAIN First Defendant

THOMAS CLARENCE HODGSON Second Defendant	

Hearing:	24 August 2015	

Appearances:	
D A Jaques, plaintiff in person
B L Gray for defendants	

Judgment:	
3 September 2015	

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on
03.09.15 at 10.30 a.m., pursuant to
Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

JAQUES v MAIN & ANOR [2015] NZHC 2123 [3 September 2015]

[1]       The plaintiff has sued the defendants for loss for damages arising out of an agreement  entered  into  between  the  parties  on  24  September  2011,  between Nouveau-Zenith Limited (“NZL”) on the one hand and Mr Jaques on the other. Pursuant to the agreement Mr Jaques was to provide services for the company as an independent contractor.  He was to be the Chief Executive officer and was to be paid at the rate of $204,000 per annum plus GST.  He was entitled to a share option.  The agreement required that in regard to the first payment he was to receive that he should  provide  an  initial  invoice  “that  shall  be  deemed  to  be  repeating  unless
changed”.1 The defendants were shareholders in and directors of NZL.

[2]       Mr Jaques claims that he did provide services for a period of some months in

2011 to the company.  But then the plaintiff and the defendants subsequently fell out. Eventually the parties decided that they would attempt to settle their differences and on 24 September they entered into an agreement which they had drawn up themselves, the provisions of which I will need to set out in their entirety:

Dave has a three year management contract with Nouveau-Zenith Limited. Dave has a claim to a share purchase option with Nouveau-Zenith Limited.
Victor  and  Tom  dispute  Dave  has  the  share  purchase  option.     In consideration of Dave waiving his right to these two terms, in full and final settlement, Victor and Tom both jointly and severally agree.

1.   To keep the $30,000 paid;

2.   To accrue $4,000 plus GST per week from 10.04.11 until the full $30,000 is paid, and;

3.   In any event to have paid all money owing under this agreement by 10.4.14;

4.   All  money  owing  under  ##2  must  be  paid  when  all money under #1 is paid.

[3]       The plaintiff filed a statement of claim claiming damages in the sums of
$740,600, $239,200 and “damages in the amount of $4,600 … accruing on a four weekly basis from 10 April 2015 until all monies paid in full”.

1 Paragraph 6.2.

[4]       Counsel for the defendants, Mr Gray said the current amount of the claim is

$986,000 approximately.

[5]       The defendant’s principal dispute with the plaintiff is that they claim he misrepresented the position when he entered into the agreement with their company, NZL.  They say that he represented that there was no reason why he could not obtain a lawyers practicing certificate as of right before he entered into the agreement. They say that he passed himself off as being a person with several million dollars in investments and a substantial housing portfolio.  They dispute that he did anything under the agreement to earn the money that he claimed that he was to say he was entitled to.  They say that he never invoiced the company as the contract required.

[6]       There are many unsatisfactory and unexplained aspects of the evidence in this case.  One of them is that at the time when the defendants say that Mr Jaques was representing  to  them  that  he  was  man  of  great  wealth,  there  is  uncontradicted evidence that he sent an email to one of the defendants which concerned his commencement of work date with Mr Jacques explaining that he would be ceasing his work as a truck driver which is how he had been supporting his family.

[7]       There  is,  though,  a  substantial  question  as  to  whether  Mr  Jaques  did misrepresent his position as to his legal qualifications.  He has apparently worked as a barrister in the past.   That may have come to an end when he was bankrupted. Whatever  the  position  was,  he  was  not  in  any  position  to  obtain  a  practicing certificate of the kind which the parties contemplated in this case at the time when he said he could.  While the contract for services did not require him to function as a lawyer but defined his role as being that of Chief Executive officer only, there is no doubt that the defendants had an expectation that he would also be able to attend to the legal work as “In house counsel”.   To do that he would have had to have a practicing certificate as a solicitor.  In that context for him to say that there was no obstacle to his obtaining such a practicing certificate would not have been true.  He did subsequently attempt to obtain such a practicing certificate, but unsuccessfully.

[8]       In addition to the contract for services, the plaintiff says that there is an agreement for him to acquire shares in NZL for the sum of $60,000.  There is no

doubt that he paid some money to the company.   It could have been as much as

$50,100 but the plaintiff also says there was a further $9,900 to be added to that sum

representing “sweat capital”.

[9]       The defendants’ account of matters is that the plaintiff agreed to introduce

$60,000 as start up capital into “our business in return for shares in NZL.  No share purchase option was ever formally agreed to however and no shareholders agreement was ever signed ….”.

[10]     NZL has since been struck off for failing to file company’s returns.

[11]     There is evidence that the funding that the plaintiff contributed was linked to an ultimate acquisition of shares in the company but I accept that there is an area of substantial dispute as to whether or not that was so.   It might be thought that the explanation that the defendants put forward is not very likely.  That seems to be that the plaintiff would put  money in and that depending on how the affairs of the company turned out he might get some shares in the future.

[12]     In any case, the parties had fallen out within approximately four months of signing the agreement and they had a meeting on 20 September 2011 which lead to the execution of the settlement agreement to which I have made reference.

[13]     The defendants  assert  that  they have  arguable  defences  to  the  plaintiff’s claim.  Unfortunately the identification of the arguable defences has not been carried out in focused way.

[14]     The two defendants for example claimed that they entered into the settlement agreement under duress.   On analysis the duress they put forward was claimed to arise  from  the  unpleasant  circumstances  of  the  meeting  that  they  had  with  the plaintiff and the fact that he threatened to take legal actions which would cause considerable loss to the defendants and their families.   Mr Gray for the defendant said they entered into the agreement against their will but I am of the view that such claims fall a long way short of a defence of duress.  There is no adequate evidence demonstrating that the will of the defendants was overborne at the time when they

entered into the contract.  Perhaps due to distraction by irrelevant issues of this kind there was a lack of close analysis of just what the issues were that genuinely arose in the circumstances of the case.

[15]     The first matter that is apparent is that the agreement for services was with NZL and not with the defendants personally.  Questions arise when they signed the agreement settling the liability owed to the plaintiff (necessarily owed by NZL), that they were accepting personal liability for the amounts claimed.  Or did they on the other hand execute the agreement as directors of the company?

[16]     Mr Gray said that the agreement for services was “void ab initio” because of misrepresentation.  This argument developed into a rather different argument as the hearing progressed.  I asked Mr Gray how the misrepresentation such as to the extent of the assets that the plaintiff owed and the question of his status as a lawyer could have impacted the settlement agreement entered into on 24 September 2011.  Such claimed misrepresentations had an obvious relevance to the circumstances in which NZL entered into the contract for services at the outset of the parties’ relationship but it was not clear as to how they could be relied upon as a basis for the defendants avoiding liability under the settlement agreement.  Mr Gray repeated on a number of occasions that the misrepresentations made in April/May before the contract for services was entered into “continued to have effect” or words to that effect right up until the time of the settlement agreement.  This, as I attempted to explain, does not advance matters  much  because it  did  not  contain  any analysis  of how it  could provide a defence to the defendants.  Their position when negotiating a settlement agreement was quite different from the position that NZL found itself in when it was assessing the merits of a prospective employee.   By contrast, when the settlement agreement was being entered into the defendants were considering quite a different arrangement, namely how they could most beneficially end their relationship with the plaintiff.  In such circumstances whatever attributes he had claimed for himself at the outset of the relationship when he was attempting to convince NZL to employ him would not seem to be particularly relevant.

[17]     I asked Mr Gray if there was any intention on the part of the defendants/NZL

to argue that at the time of entering into the settlement agreement the defendants,

still unaware of the substance of the misrepresentations that had been made, were mistaken about the true position when they entered into the settlement agreement. He told me that that was not part of his case.

[18]     Another aspect of the case that caused me some unease was the following.  It was how a claim for $30,000 developed into a summary judgment application for nearly $1,000,000 some four years later.  In that regard I pointed out to the plaintiff that the settlement agreement did not apparently make any explicit arrangements for settling the liability that NZL/the defendants might have arising from the premature termination of the contract for services.  What the parties seem to have had in mind is that the re-payment of the $30,000 would be carried out at the same rate as the plaintiff would have been paid under the contract for services.  It was only in this indirect way that the contract for services had any connection with the settlement agreement.  If this analysis is correct, what has happened is that the only debt fixed by the agreement has increased 33 times over four years.  If that is the effect of the agreement, this raises questions of whether the contract is unenforceable because it imposes  a  penalty  on  the  defendants:  Bridge  v  Campbell  Discount  Company
Limited.2

[19]     In order to better understand what the effect of the contract was, further consideration will have to be given to what the parties actually intended by their contract.   It would seem to at least be arguable that the effect of the contractual arrangements was that the amount that was owing under the contract, $30,000, was repayable at the rate of $4000 per week.  This last amount was presumably chosen because that would involve payment of an amount that would otherwise have been expended on the liability which the company owed on account of the contract for services that it entered into with the plaintiff.   That being so, the $30,000 should have been paid off within 7 ½ weeks.

[20]     If the defendants had not paid that amount off within 7 ½ weeks they would have not complied with their contractual obligation.  That may not have amounted to a breach of contract, though, because of the further requirement that all payments
were to have been completed by April 2014.   But it would appear that they have

2	Bridge v Campbell Discount Company Limited [1962] AC 500.

been in breach from the latter date.  By my calculations, had no payments been made from September 2011 when the contract was entered into up until April 2014 (at which point the defendants would have been in breach of the contract), the amount owing at $4000 per week would have accrued to the sum of $548,000.   In the absence of any assistance on the point, and adopting Mr Gray’s submission that
$986,000 is now owing, it appears that since the point where the defendants have been in breach of contract, an additional $438,000 has been debited to them.

[21]     It is not possible to calculate what the interest rate being charged is but it is self-evident that the above figures show that if the defendants did not pay on time in April 2014 then they were subject to very large additional imposts which cannot be explained as conventional interest and which arguably amount to penalties.     A contract of that kind would not arguably be enforceable.

[22]     For those reasons I conclude that the summary judgment application cannot succeed and it is dismissed.  Costs are reserved.  The parties are to confer on steps to be  taken  to  progress  the  proceeding  from  this  point  and  are  to  file  a  joint
memorandum or separate memoranda within 21 days of the date of this judgment.

J.P. Doogue
Associate Judge