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Diver v Loktronic Industries Ltd [2012] NZCA 131; [2012] 2 NZLR 388; (2012) 10 NZBLC 99-707 (4 April 2012)

Last Updated: 26 January 2018

JUDGMENT OF THE COURT

1. The appeals by Stephen Diver (CA258/2011), by Neil Hingston (CA259/2011) and by Roy Bowyer, Trimec Technology Pty Limited and Assa Abloy New Zealand Limited (CA260/2011) against the findings of liability for the various torts are allowed. The judgment in favour of Loktronic Industries Limited in the sum of $1,420,721 plus interest is set aside.
2. Neil Hingston Engineeering Limited’s appeal, (CA259/2011), against the finding that the manufacturing contract was exclusive, having been abandoned, is dismissed.

C The cross-appeal is dismissed.

4. Loktronic Industries Limited must pay Stephen Diver, Neil Hingston, Roy Bowyer, Trimec Technology Pty Limited and Assa Abloy New Zealand Limited costs on a band A basis for a complex appeal. We certify for second counsel.
5. Costs in relation to the appeal by Neil Hingston Engineering Limited lie where they fall.

REASONS OF THE COURT
(Given by Ellen France J)

Table of Contents

Para No
The appeals [1]
Factual background to the intentional torts [9]
The High Court decision [20]
Inducing breaches of contract [23]
Interference by unlawful means [25]
The issues on appeal [28]
Inducing breach of the manufacturing contract (Loktronic and
NHEL) [29]
The test for knowledge and intention [33]
Drawing the threads together [47]
Mr Hingston [51]
Mr Diver [66]
Mr Bowyer and Trimec [78]
Assa Abloy NZ Limited (AANZL) [88]
Inducing breach of the distribution contract between Loktronic
and Trimec [93]
Mr Bowyer [95]
AANZL [99]
Interference in business by unlawful means [100]
Misrepresentations [106]
Inducing breach of the effeff contract [127]
Conspiracy to interfere with the manufacturing contract by
unlawful means [132]
Other matters [133]
Disposition [135]

The appeals

[1] For a number of years prior to 2002, Loktronic Industries Ltd (Loktronic), ran a profitable business supplying electronic products to the domestic and export market. Loktronic’s most profitable product was an electronic drop bolt. A company called Neil Hingston Engineering Ltd (NHEL) had manufactured the drop bolt for Loktronic over a 13-year period. There was no written agreement between Loktronic and NHEL but each month over the period of their arrangement Loktronic would order by invoice to NHEL the number of bolts to be manufactured that month. NHEL had supplied locks to Security Screen Doors Ltd (later Loktronic Distributors Ltd), the company that was purchased by Loktronic from 1984.
[2] Loktronic acted as distributor of bolts and other products for Trimec Technology Pty Ltd (Trimec), an Australian company. There was no written agreement between Loktronic and Trimec although their arrangement had been in place for a number of years.
[3] The relationship between Loktronic and the other parties changed in July 2002. In late July, Trimec and NHEL agreed on a joint venture arrangement under which NHEL agreed to stop manufacturing for Loktronic and instead make the bolt exclusively for Trimec. At the same time Trimec ended its relationship with Loktronic. In effect, the new arrangements cut out the “middle man”, namely, Loktronic.
[4] Loktronic brought proceedings against the appellants alleging that either alone and/or in combination they caused loss to Loktronic of its business. The claims depended on Loktronic’s argument that there were two oral contracts, each of which included an implied term that the respective contract could only be terminated on reasonable notice. The first of the oral contracts contended for was with NHEL, under which NHEL agreed to manufacture the drop bolt exclusively for Loktronic (the manufacturing contract). The second contract was with Trimec, under which Loktronic was appointed Trimec’s exclusive New Zealand distributor (the distribution contract).
[5] The claims which give rise to the appeals were as follows:

(a) The appellants, except for NHEL,^[1] induced NHEL to breach the manufacturing contract;

(b) Roy Bowyer (a director of Trimec) and Assa Abloy New Zealand Ltd (AANZL, the ultimate owner of Trimec), induced Trimec to breach its distribution contract with Loktronic;

(c) Stephen Diver (an adviser to, and director of, Trimec), Trimec and Mr Bowyer interfered in Loktronic’s business by unlawful means; and

(d) Mr Diver, Trimec and Mr Bowyer conspired to interfere with Loktronic’s business by unlawful means.^[2]

[6] On Loktronic’s case, the tortious conduct arose because the two contracts were brought to an end in breach of an implied term that Loktronic was entitled to reasonable notice. Loktronic sued for a total of over $10.9 million.
[7] The matter went to trial in the High Court before Courtney J. The Judge found there were two oral contracts as pleaded by Loktronic. Courtney J also concluded there was an implied term in each contract that termination required reasonable notice. That term had been breached in relation to each contract. Courtney J found that the claims now in issue were made out against the various defendants.^[3] The Judge awarded damages in the order of $1.4 million together with interest.^[4]
[8] There is no challenge now to the finding that there were two oral contracts or to the implied term of termination on reasonable notice (six months for the manufacturing contract and three months for the distribution contract) or that what occurred amounted to a breach of those terms. NHEL abandoned an appeal against the finding that the contract was exclusive and that part of the appeal is formally dismissed. Rather, the primary focus is on the Judge’s approach to knowledge and intention in relation to the claims based on inducing breach of the two contracts.

Factual background to the intentional torts

[9] The background is set out in the judgment of Courtney J and we largely adopt the Judge’s description of background events.^[5]
[10] As the starting point, we go back to 1995 when Mr Diver, formerly an official in the Ministry of Foreign Affairs and Trade, formed a company called SDR Ltd (SDR). The company acted as an adviser and consultant for New Zealand exporters wanting to enter the German and Eastern European markets. In 1996, Mr Diver approached Peter Calvert and his wife, Elizabeth Calvert, offering his company’s services to Loktronic to identify export customers in Europe. Mr Calvert had incorporated Loktronic in 1989. Prior to that he was the General Manager of Loktronic Distributors Limited.
[11] Loktronic and SDR reached an agreement under which SDR was paid fees on a daily rate with a sales-related percentage success fee. The parties’ arrangement led to a three year supply contract between Loktronic and effeff Fritz Fuss GmbH and Co (effeff), which was signed in March 1998. The three-year period was later extended to 2003.
[12] We can move then to mid-1999. At that point, effeff engaged SDR to advise it on the acquisition of Trimec. Acting on effeff’s behalf, in February 2000 Mr Diver gave Mr Calvert a letter setting out effeff’s interest in acquiring Loktronic. Mr Calvert’s response was that he wanted to deal directly with Martin Brandt who was the Managing Director of effeff. Correspondence between Mr Calvert and Mr Brandt about effeff’s interest ensued. Soon after this Mr Calvert ended Loktronic’s relationship with SDR. This was an amicable arrangement with a payment by Loktronic to SDR of a relatively modest lump sum in full and final settlement of any amounts that might become due under the terms of their arrangement.
[13] Mr Diver’s relationship with effeff continued. In 2000 effeff acquired Trimec. About that time, effeff was itself acquired by a Swedish company Assa Abloy so that Trimec and effeff became part of the wider Assa Abloy group. Assa Abloy was described by Mr Bowyer as the largest locking company in the world, although the group’s specialty was the supply and manufacture of mechanical locking devices rather than electronic locks. Mr Diver was on Trimec’s board as Assa Abloy’s representative but without voting rights.^[6]
[14] Over this period effeff came under pressure from Assa Abloy to purchase product from within the Assa Abloy group. Mr Brandt wrote to Mr Calvert in April 2000 explaining that and proposing that, to provide greater security for effeff and Loktronic, effeff acquire Loktronic’s patents in relation to the bolts. That would enable effeff to move the manufacturing of the bolt to effeff itself. The letter also repeated effeff’s interest in acquiring Loktronic. However, it was plain that Mr Calvert did not want to lose control over Loktronic.
[15] After effeff acquired Trimec, the Trimec board comprised Geoff Norcott as Chairman, Mr Brandt (from effeff), Mr Bowyer and Graham Luker (both without voting rights and only for the duration of their “earn-out” period) and Mr Diver (with no voting rights).^[7] Mr Bowyer and Mr Diver gave evidence that Mr Norcott controlled all discussions and decisions. Mr Norcott was also the Regional Manager for the Assa Abloy group in the Asia-Pacific region and so had concerns with the interests of the Assa Abloy group generally. Mr Norcott was not referred to in the pleadings. He did not give evidence.
[16] As Courtney J said, the view that emerged from the various witnesses was that Mr Norcott and Mr Brandt wanted to improve Trimec’s profitability. They began to consider possible acquisitions as a way of achieving that. Loktronic’s drop bolt was seen as one means by which that might be attained. The Judge found that the suggestion to acquire the rights over the electronic bolt came originally from Mr Brandt and Mr Diver, and was recognised by Mr Norcott as a way of advancing not only Trimec’s position but also that of the Assa Abloy group. Mr Norcott also sat on the board of the New Zealand companies Lockwood Arrow Ltd and Interlock Group Ltd, previously called Assa Abloy New Zealand Ltd, both members of the Assa Abloy group. Lockwood Arrow Ltd manufactured door closers and AANZL made window levers. Mr Bowyer thought that acquiring NHEL would lead to the appointment of one of these companies as Trimec’s distributor in New Zealand because that would ensure that all profit from Trimec products, which would include the electronic bolt if the acquisition went ahead, would be kept within the Assa Abloy group.
[17] It seems that acquiring NHEL was seen as the most likely means of securing the rights to manufacture the bolt. NHEL was operated by its director, Neil Hingston, and his son, Matthew. In June 2002 Mr Diver approached NHEL on Trimec’s behalf. The Judge recorded that Mr Diver was unimpressed with the “modest” manufacturing operation that he found but that he was impressed by Mr Hingston.^[8] Mr Diver obtained some financial information from Mr Hingston and then prepared a draft paper with Mr Bowyer and Mr Brandt, which was presented as an “extraordinary board paper” (the board paper) on 24 June 2002. The board paper set out this assessment of the impact on Loktronic of Trimec acquiring NHEL:

With the sale of Hingston Engineering [NHEL], Loktronic’s business will probably close. Calvert will need to find an immediate alternative contract manufacturer and new distributors. Also TT [Trimec] and [e]ffeff will shift their agencies to Interlock [the New Zealand Assa Abloy company]. Hence he is left without a domestic or export business. His response may be physical aggression towards the Hingston family and they should be prepared for it.

[18] Mr Norcott decided not to acquire NHEL. He was influenced by a report that Graham Luker and Thomas Schtocker (Head of Research and Development for Assa Abloy) considered Loktronic’s patents on the bolt were indefensible. Nonetheless, Trimec still wanted to acquire the bolt and a new proposal was made, namely, a joint venture between Trimec and NHEL. As part of the negotiations and the due diligence exercise undertaken by Mr Diver, assurances were sought from Mr Hingston that NHEL had no binding contractual commitment to Loktronic. NHEL and the new joint venture company incorporated by Mr Hingston, MANZ Engineering Ltd (MANZ), gave indemnities for litigation arising from the joint venture. Under the joint venture arrangement, NHEL would manufacture the electronic bolt exclusively for Trimec.
[19] Matters came to a head at a meeting held in Loktronic’s offices on 23 July 2002. At that meeting, Mr Hingston told Mr Calvert about the joint venture between NHEL and Trimec. Mr Bowyer then spoke. He said he commented on relationship difficulties between Mr and Mrs Calvert and queried the effect this might have on Loktronic and its ability to meet its financial obligations. Mr Calvert reacted strongly to this and the visitors were ushered out of the building. The next day Mr Bowyer wrote to Mr Calvert and in this letter he purported to accept what he described as a repudiation by Loktronic of the distribution contract. The present proceedings followed, although they were not issued until 22 July 2008. The delay in issuing the proceedings may, in part at least, explain why some of the witnesses had difficulty recalling precisely who had said what on particular occasions.

The High Court decision

[20] As we have indicated, Courtney J found there were two relevant oral contracts, namely, a manufacturing agreement between Loktronic and NHEL, and a distribution agreement between Trimec and Loktronic. Under the manufacturing contract, NHEL manufactured the electronic bolt exclusively for Loktronic and Loktronic bought exclusively from NHEL. Under the distribution contract Loktronic was Trimec’s exclusive distributor in New Zealand.
[21] Courtney J concluded that under the manufacturing contract Loktronic was entitled to notice of termination and that a period of six months notice was reasonable. For the distribution agreement, the Judge considered it was implied into this agreement that it would only be terminated on reasonable notice. A three month notice period was reasonable.
[22] Courtney J rejected Trimec’s argument that it terminated the distribution contract following repudiation by Loktronic. Trimec’s approach had been to deny there was a contract but, to maintain, if one existed, that Loktronic repudiated the contract and Trimec accepted the repudiation. This aspect largely turned on the meeting on 23 July 2002 and what followed the next day. The Judge found that Trimec’s letter of 24 July 2002 was a breach of the obligation to terminate on reasonable notice.

Inducing breaches of contract

[23] The Judge then dealt with the cause of action based on inducing breach of the two contracts brought against all parties except NHEL. Courtney J relevantly found Messrs Hingston, Diver and Bowyer, Trimec and AANZL liable for inducing a breach of the manufacturing contract. Mr Bowyer and AANZL were also found liable for inducing a breach of the distribution contract. The Judge said Mr Hingston had “constructive” knowledge that his actions would result in a breach of the manufacturing contract.^[9] Mr Diver was indifferent to this outcome and Mr Bowyer turned a blind eye. Trimec was liable on the basis of the knowledge of its directors. AANZL was liable on the basis of Mr Norcott’s knowledge.
[24] The Judge found that, while Mr Hingston was aware of the distribution contract, there was insufficient evidence to support a finding that he intended or did any act to effect its breach. The claim of inducing breach of contract made in relation to SDR also failed. Finally, the claim of inducing the breach of the distribution contract failed in respect of Mr Diver because he had no intention to injure Loktronic.

Interference by unlawful means

[25] The claim of interference with the contracts by unlawful means was based on the following unlawful means:

(a) Interfering with the manufacturing and distribution contracts by inducing breaches;

(b) Deliberate misrepresentations by Mr Bowyer and Mr Diver by making false statements to Mr Hingston about Loktronic’s commercial prospects;

(c) Inducing breaches of the effeff contract and the export contracts that Loktronic held with IEC (a United Kingdom-based company) and Alarmcom (Singapore);

(d) Disclosure of confidential information by Mr Diver; and

(e) Breach of Loktronic’s patent.

[26] The Judge rejected the claims relating to disclosure of confidential information and breach of the patent ((d) and (e) above). As to the first alleged unlawful means, interfering with the contracts, the Judge found that the acts of inducing NHEL to breach the manufacturing contract and Trimec to breach the distribution contract constituted unlawful means. The claim relating to deliberate misrepresentations was upheld in relation to Messrs Bowyer and Diver. The Judge found on the third of the alleged unlawful means, that is, inducing breaches of the effeff contract and the contract that Loktronic held with IEC and Alarmcom, that Mr Bowyer had interfered with these relationships. His actions amounted to interference by unlawful means in respect of the effeff contract but the case against him in relation to IEC and Alarmcom failed because the evidence was not clear as to the nature of the arrangements with these customers.
[27] Courtney J found that an allegation of conspiracy for unlawful purposes was not proven. Trimec, Mr Bowyer and Mr Diver were however found liable for conspiring to interfere in the manufacturing contract by unlawful means.

The issues on appeal

[28] The issues raised by the appeals can be conveniently dealt with by answering the following questions:

• (a) Was it proven that Messrs Diver, Hingston and Bowyer, Trimec and AANZL knew that their conduct would induce a breach of the manufacturing contract between Loktronic and NHEL?
• (b) Was it proven that Mr Bowyer and AANZL knew that their conduct would induce a breach of the distribution contract between Loktronic and Trimec?
• (c) Was it proven that Mr Diver, Trimec and Mr Bowyer interfered in Loktronic’s business by unlawful means?
• (d) Was it proven that Mr Diver, Trimec and Mr Bowyer conspired to interfere with Loktronic’s business by unlawful means?

Inducing breach of the manufacturing contract (Loktronic and NHEL)

[29] Hazel Carty provides a helpful discussion of the history of the tort of inducing breach of contract.^[10] As she notes, the tort has its origins in the protection from interference offered in medieval times at common law to the master-servant relationship.^[11] The current form of liability dates back to the 1853 case of Lumley v Gye.^[12] In that case, a singer was persuaded by the defendant to break her exclusive contract with the claimant and to sing for the defendant instead. The defendant’s action, undertaken with knowledge of the claimant’s contract was held to be tortious. Hazel Carty also discusses the uncertainty and complexity associated subsequently with the tort.^[13] She notes the House of Lords set out to remedy this complexity and uncertainty in OBG v Allen.^[14]
[30] Before us, the parties proceeded on the basis that the elements of this tort were as set out in OBG. Those elements are summarised in The Law of Torts in New Zealand as follows:^[15]

(1) There must be a legally enforceable contract in existence.

(2) The defendant must have engaged in conduct which in fact induced a breach of the contract.

(3) The defendant must have known that his or her conduct would induce the breach.

(4) The defendant’s conduct inducing the breach must have caused loss or damage to the plaintiff ... .

(5) Even if elements 1 to 4 are satisfied, a defence of justification might arise, albeit only in exceptional circumstances.

[31] As noted in The Law of Torts in New Zealand,^[16] there are some differences between the OBG formulation and that of this Court in Jiao v Barge^[17] which pre-dated OBG. However, as the parties all adopted the OBG formulation, we have proceeded on the same basis. For present purposes, nothing turns on the differences in approach between the two cases. For the appeals against liability, the focus is on what constitutes knowledge, that is, element (3) in the list of elements cited above. On this aspect, it is common ground that Courtney J was correct to approach the matter on the basis something less than actual knowledge will suffice. Where the parties diverge is on what that lesser state of knowledge encompasses and whether the Judge applied the correct test.
[32] To illustrate the issue and put the discussion of the authorities which follows in context, the competing views are illustrated by the submissions of Mrs Grant for Loktronic, on the one hand and that of Mr Morrison, counsel for Mr Diver, on the other. Mrs Grant submits that in a case such as this, where the parties are not strangers to the contractual arrangements, the knowledge requirement is also met if the defendant knows it is possible a contract exists and does not make further inquiry. On counsel’s analysis, that is reckless indifference. In any event, Mrs Grant says, if the test is better put as one of wilful blindness, that standard was also met in this case. By contrast, Mr Morrison says that to meet the knowledge requirement involves actual knowledge or a subjective belief that there is a high probability a contract exists and a deliberate choice to avoid further inquiry. Mr Morrison, like the other counsel for parties appealing under this head, submits the test was not met in this case.

The test for knowledge and intention

[33] Liability for inducing breach of contract requires the defendant to “actually realize” he or she is inducing a breach of contract.^[18] It is not sufficient to know that an act is being procured which, at law or as a matter of construction of the contract, is a breach. Nor is it sufficient that the defendant ought reasonably to have realised that a breach of contract would result. To illustrate this point, Lord Hoffmann in OBG referred to British Industrial Plastics Ltd v Ferguson.^[19] In that case, the plaintiff’s former employee offered the defendant information about one of the plaintiff’s secret processes which he, as an employee, had invented. The defendant was aware that the employee was contractually obliged not to reveal trade secrets but held what was described as “the eccentric opinion that if the process was patentable, it would be the exclusive property of the employee”.^[20] The defendant received the information in the honest belief that the employee would not be in breach of contract. In the Court of Appeal, MacKinnon LJ said that in accepting this evidence the Judge had “vindicated” the defendant’s honesty “at the expense of his intelligence”^[21] but that Court and the House of Lords agreed that the defendant could not be held liable for inducing a breach of contract because he did not have the necessary knowledge.
[34] As to what constitutes knowledge in this context, their Lordships in OBG accepted that a lesser state than actual knowledge would suffice. Lord Hoffmann put it in this way in endorsing the position of Lord Denning MR to the same effect in Emerald Construction Co Ltd v Lowthian:^[22]

[40] ... In Emerald Construction ... union officials threatened a building contractor with a strike unless he terminated a subcontract for the supply of labour. The defendants obviously knew that there was a contract – they wanted it terminated – but the court found that they did not know its terms and, in particular, how soon it could be terminated. Lord Denning MR said, at pp 700–701:

“Even if they did not know the actual terms of the contract, but had the means of knowledge – which they deliberately disregarded – that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not.”

[35] Lord Hoffman noted that Lord Denning’s statement had been followed in many cases without apparently giving rise to any difficulty. Lord Hoffmann also considered the statement was consistent with “the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact”.^[23] Importantly, for present purposes, Lord Hoffmann continued:

[41] ... It is not the same as negligence or even gross negligence: in British Industrial Plastics ..., for example, [the defendant] did not deliberately abstain from inquiry into whether disclosure of the secret process would be a breach of contract. He negligently made the wrong inquiry, but that is an altogether different state of mind.

[36] As to what constitutes an intention to procure a breach, Lord Hoffmann said it was necessary to “distinguish between ends, means and consequences”.^[24] Lord Hoffmann went on to say:

[42] ... If someone knowingly causes a breach of contract, it does not normally matter that it is the means by which he intends to achieve some further end or even that he would rather have been able to achieve that end without causing a breach. ...

[43] On the other hand, if the breach of contract is neither an end in itself nor a means to an end, but merely a foreseeable consequence, then in my opinion it cannot for this purpose be said to have been intended. That, I think, is what judges and writers mean when they say that the claimant must have been “targeted” or “aimed at”. In my opinion the majority of the Court of Appeal was wrong to have allowed the action in Millar v Bassey [1994] EMLR 44 to proceed. Miss Bassey had broken her contract to perform for the recording company and it was a foreseeable consequence that the recording company would have to break its contracts with the accompanying musicians, but those breaches of contract were neither an end desired by Miss Bassey nor a means of achieving that end.

[37] Lord Nicholls dealt with the elements of knowledge and intention in this way:

[191] ... The mental ingredient is an intention by the defendant to procure or persuade (“induce”) the third party to break his contract with the claimant. The defendant is made responsible for the third party’s breach because of his intentional causative participation in that breach. Causative participation is not enough. A stranger to a contract may know nothing of the contract. Quite unknowingly and unintentionally he may procure a breach of the contract by offering an inconsistent deal to a contracting party which persuades the latter to default on his contractual obligations. The stranger is not liable in such a case. Nor is he liable if he acts carelessly. He owes no duty of care to the victim of the breach of contract. Negligent interference is not actionable.

[192] The additional, necessary factor is the defendant’s intent. He is liable if he intended to persuade the contracting party to breach the contract. Intentional interference presupposes knowledge of the contract. With that knowledge the defendant proceeded to induce the other contracting party to act in a way the defendant knew was a breach of that party’s obligations under the contract. If the defendant deliberately turned a blind eye and proceeded regardless he may be treated as having intended the consequence he brought about ... .

[38] Finally, Lord Nicholls noted that an honest belief by the defendant that what he or she seeks to achieve will not entail a breach of contract is inconsistent with an intention to induce. Lord Nicholls said:

[202] ... [The defendant] is not to be held responsible for the third party’s breach of contract in such a case. It matters not that his belief is mistaken in law. Nor does it matter that his belief is muddle-headed and illogical, as was the position in British Industrial Plastics Ltd v Ferguson ... . As Lord Devlin said in Rookes v Barnard [1964] [AC] 1129, 1212, the defendant must know of the contract “and of the fact that the act induced will be a breach of it”... .

[39] Arden LJ also addressed the question of “blind eye” knowledge in Meretz Investments NV v ACP Limited.^[25] Arden LJ said that knowledge may include “shut eye” knowledge, namely, the knowledge that would have been acquired “had not a decision been made not to inquire” about the relevant fact.^[26]
[40] On the issue of knowledge, John Hughes in The Law of Torts in New Zealand suggests that it “may now be sufficient if the defendant knew of the likely existence of a contract or the general contractual situation or business practice in a particular field.”^[27] It is helpful to briefly consider three of the New Zealand cases cited for that proposition.
[41] The first of these cases is Winstone Wallboards Limited v Canterbury and Westland Stores, Packing and Warehouse Workers’ Industrial Union of Workers.^[28] This was an application for an interim injunction to restrain the defendants from picketing activities outside the plaintiffs’ factories on the basis those activities amounted to deliberate interference in contractual relations. The High Court in granting an interim injunction concluded it was sufficient to show there was deliberate interference by the defendants in that they “[knew] generally” of the existence of the contracts and intended them to be breached.^[29] Holland J spoke of the general contractual situations, for example between Winstone and its plaster suppliers, which must have been known to the defendants.
[42] A similar approach was taken in Mid-Canterbury Industries Ltd v The Canterbury and Westland Stores, Packing and Warehouse Industrial Union of Workers,^[30] again, an application for an interim injunction. Mid-Canterbury Transport, a trading name for the plaintiff company’s road transport division, handled all freight sent to Christchurch by a company called Pengelly Sea-Road Services Ltd. The union made various demands on the company about who was to handle the packing and unpacking related to the Pengelly work. The company refused to comply so bans were imposed that affected the work with Pengelly. Pengelly had said that this business would resume if and when the ban was lifted. It was found that a regular course of business had been established which was sufficient to raise a serious question to be tried on the issue of unlawful interference. However, in reaching that conclusion, Roper J relied on Torquay Hotel Company Ltd v Cousins.^[31] In Torquay Hotel Lord Denning had suggested that interference could be unlawful even where a breach of contract did not arise. This was taken by Roper J to mean that where a regular course of business has been established, unlawful interference can apply not only to existing contracts, but also “contracts to be made in accordance with the regular course of business dealing”.^[32] The House of Lords in OBG rejected this proposition in the context of the tort of inducing breach of contract.^[33]
[43] The issue also came before this Court in State Insurance Ltd v New Zealand Motor Body Builders’ Association Inc.^[34] The Court referred to the “apparent exception” suggested in The Law of Torts in New Zealand, where there is a “recognised course of business dealing so that an existing contract may be expected to be succeeded by like contracts”.^[35] Hardie Boyes J noted J T Stratford and Sons v Lindley^[36] as the principal authority for this proposition but suggested that Lord Reid’s observations were more relevant to the separate tort of unlawful interference with business interests. The Court left the question open and suggested that even in such cases the question of justification might arise.
[44] Although arising in a different context, (the state of mind for dishonest assistance), the observations of the Supreme Court in Westpac New Zealand Ltd v Map are helpful as to what lesser state of knowledge will suffice.^[37] Tipping J delivering the judgment of the Court, said a dishonest state of mind may comprise actual knowledge that the assistor cannot honestly participate in the transaction. Tipping J continued:^[38]

[27] ... But it may also consist in what we would describe as a sufficiently strong suspicion of a breach of trust, coupled with a deliberate decision not to make inquiry lest the inquiry result in actual knowledge. For the purpose of this alternative, it is necessary that the strength of the suspicion that a breach of trust is intended makes it dishonest to decide not to make inquiry. That state of mind, which equity equates with actual knowledge, is usually referred to as wilful blindness. It involves shutting one’s eyes to the obvious and can thus fairly be equated with the dishonesty involved when there is actual knowledge.

[45] To illustrate the point, Tipping J referred to Manifest Shipping. The issue in that case was whether ship owners knew a ship was not seaworthy and whether, for insurance purposes, they were privy to the unseaworthiness. Tipping J noted Lord Hobhouse’s statement that if the decision not to inquire was made because the ship owners did not want to know the truth “for certain”, a finding of privity should be made.^[39]
[46] A similar approach has been taken in the United States, albeit in the context of a provision dealing with patent infringement.^[40] In Global-Tech Appliances, Inc v SEB SA,^[41] the Supreme Court of the United States saw the criminal law approach to wilful blindness as setting the appropriate standard. The two basic requirements identified under that head were as follows:^[42]

• (1) the defendant must subjectively believe that there is a high probability that a fact exists and
• (2) the defendant must take deliberate actions to avoid learning of that fact.

Drawing the threads together

[47] As we read these authorities, the references to wilful blindness and “shuteye” knowledge suggest that more is required in this case than the possibility of the existence of a contract and an associated failure to inquire into that possibility. Rather, the required state of knowledge involves a suspicion of sufficient strength that a contract exists and a deliberate choice not to make inquiries. The fact that the existence of a contract should have been obvious is not sufficient as that is negligence.^[43] A subjective, rather than an objective, inquiry is required. Such an approach accords with the fact that this is an intentional tort.
[48] In describing the approach taken in the High Court, Courtney J utilised the formulation derived from Emerald Construction; that is, to say the knowledge requirement is met where the party “has the means of knowledge” but deliberately disregards them “or is indifferent or reckless”.^[44] The focus on the “means of knowledge” in the context of Emerald Construction was appropriate because there the defendants knew there was a contract but did not know its terms. In the current situation involving oral contracts that the defendants denied existed, there is in our view a danger that concentrating on the means of knowledge runs the risk of shifting the focus from an inquiry into a subjective state of mind to an objective one. We come back to this when addressing the specifics of this case.
[49] Before leaving our discussion on the law, we briefly address the application of these principles in the context of an oral contract. There are limitations on the three New Zealand cases relied on by John Hughes in relation to the effect of knowledge of an ongoing business practice. Nonetheless, at a general level anyway, those authorities are consistent with the view that shuteye knowledge could equally apply to a case such as the present. It seems to us that the impact of an oral contract will be a factual one. Where the contract is oral, as here, and there is a real debate about the existence of a contract, those factors must be part of the factual matrix in which the appellants’ state of mind is considered. That is because a contract may not be the only conceivable way in which the parties could have conducted their business. Accordingly, it may mean a party’s stated belief that he or she was not aware of a contract, or accepted assurances there was none, is more believable.
[50] We turn then to the present case. We deal first with that part of the appeal relating to the claim that the appellants, other than NHEL, induced the breach of the manufacturing contract between Loktronic and NHEL. The issue for each of these appellants is whether it was proven the individual or company concerned had knowledge of the contract and intended its breach.

Mr Hingston

[51] As we have noted, Mr Hingston ran NHEL along with his son, Matthew. The Judge found the 13-year arrangement between Loktronic and NHEL was contractual. Mr Hingston’s evidence was that there was no formal written arrangement with Loktronic but that he just supplied Loktronic with stock as requested. Consistently with that it appears that, in June 2002, Mr Diver asked Mr Hingston about the position with respect to the arrangements with Loktronic. At that point, Mr Hingston told him that there was no contract. These inquiries were made as part of the financial due diligence exercise undertaken by Mr Diver on behalf of Trimec.
[52] Various issues were being discussed over the course of the negotiations process. As we have indicated, the initial idea floated in June 2002 was that Trimec would buy NHEL. The proposal then changed to a joint venture arrangement which was to be reflected in a joint venture agreement (JVA). In early July 2002, Mr Hingston sent his accountant, Bruce Simpson, a copy of the draft JVA. On 7 July, Mr Hingston received an email from Mr Simpson. The email was only one page but covered a range of different matters Mr Simpson said Mr Hingston needed to think about. The last point was as follows:

You also need to get sorted out with the Lawyers and Patent Attorneys where you stand in relation to Loktronic... .

[53] Legal advice was obtained in relation to the patents. The evidence about what legal advice Mr Hingston obtained about his relationship with Loktronic is unclear. Mr Hingston said he did not think he had asked his lawyer, Kerry Dean, about the issue of terminating supply to Loktronic because he had no particular concerns about the impact of the proposed joint venture on that arrangement. The exchange in cross-examination went as follows:

...I had, out of the blue, received an offer first of all to buy the company and then it changed into a joint venture. This was all completely new stuff to me and it seemed prudent to talk to a lawyer and see if I was doing the right thing. I had no sort of specific concerns about whether I was breaking a contract, those sort of things didn’t occur to me. But I thought I’ve got to talk to a lawyer and get this sorted because it’s not my field. We make things and we get advice on other things that we don’t know about ... .

[54] Mr Dean was provided with at least one version of the draft JVA, one of the terms of which was that the supply would be exclusive as between Trimec and NHEL. It appears that seeing the draft agreement triggered a request from Mr Dean to Mr Hingston for some background about the arrangements with Loktronic. Mr Hingston prepared a background note. Although the Judge said there was no evidence Mr Hingston had sent this note to Mr Dean, the note was produced in the re-examination of Mr Hingston and Mr Hingston confirmed that he had sent the note to Mr Dean. Mr Hingston said this about the note:

... when I was asked I thought it was from Kerry Dean to me but this is from me to Kerry Dean. I must have talked to Kerry Dean on the telephone about the joint venture. And he asked for a little bit of background so I wrote him something out on a bit of paper – this is it – and I sent it to him. This was the day before the meeting with Mr Calvert.

[55] Earlier, in cross-examination, Mr Hingston said he was unclear what version of the draft JVA he had sent to Mr Dean but in terms of the advice he received about it he said:

... All I can remember is his comment “these things generally aren’t worth the paper they’re printed on” and that was the extent of the legal advice I ended up getting from him.

[56] The Judge’s critical findings in relation to Mr Hingston were as follows:

[75] Had Mr Hingston not been alerted by his accountant to the need to obtain legal advice on his relationship with Loktronic, I would have concluded that he did honestly believe that there was no contract between them. However, I find that Mr Hingston proceeded with the [JVA] knowing that there could very well be an issue over his relationship with Loktronic but electing not to pursue that matter; in other words he was indifferent to the question of whether NHEL had any contractual obligations to Loktronic. I therefore proceed on the basis that Mr Hingston had constructive knowledge of the manufacturing contract through his indifference to the issue. It is clear, therefore, that he knew that entering into the joint venture would result in a breach of that contract.

[76] The remaining issue is whether Mr Hingston intended to cause loss to Loktronic; if not he will not be liable for inducing the breach of contract, since he was acting in his capacity as NHEL’s director. It was clear to Mr Hingston that the loss of NHEL as manufacturer would badly affect Loktronic’s business. Mr Hingston acknowledged in cross-examination that he knew that after NHEL ceased supplying Loktronic, Loktronic would not be able to fill orders from effeff, which he knew to be Loktronic’s main export customer. In these circumstances, in acting to effect a breach of the manufacturing agreement, I find that Mr Hingston did so with the intention of injuring Loktronic; the loss to Loktronic was not merely a foreseeable consequence of Mr Hingston’s actions, it was the only means by which he could sever the relationship so as to allow NHEL to enter the joint venture with Trimec.

[57] It is not entirely clear from these findings whether the conclusion is that Mr Hingston’s failure to respond to the accountant’s advice showed he could not have had an honest belief or whether it is said that the accountant’s advice caused him to alter his earlier view. Mrs Grant says the Judge has found that Mr Hingston had no honest belief. Given the opportunity the Judge had to assess the credibility of Mr Hingston, and all of the witnesses, Mrs Grant submits that this Court should be loath to take a different view. That latter submission has force.^[45] But to reach that conclusion the Judge had to be satisfied that Mr Hingston’s state of mind was such that, having been alerted by his accountant he had a suspicion of sufficient strength that there was a different position but nonetheless chose not to make further inquiries. With respect, we cannot see how that conclusion can be reached if the correct, subjective, standard (discussed at [47] above) is applied.
[58] Mr Hingston said in evidence he thought the commercial relationship with Loktronic was an order by order arrangement. It was not directly put to him that his belief was not genuine. Rather, the suggestion seems to have been that the comparison Mr Hingston drew was between the effect of a written record of an agreement and an oral agreement with only the former being binding. At one point, for example, Mr Diver accepts that Mr Hingston told him there was no “written” agreement.
[59] Courtney J considered the “more likely explanation” for Mr Hingston’s willingness to sign the indemnity requested by Mr Diver (and, presumably to give the assurances he did) to be his “naive” belief that unless an agreement was recorded in writing, it was not binding.^[46] That naive belief, whatever its basis, is not consistent with Mr Hingston being aware of the possibility that there was a binding contract but choosing not to make further inquiries or being indifferent about that.
[60] As we have foreshadowed, the fact the contract was oral has an impact in a factual sense. The reality was that Mr Hingston’s state of mind had to be assessed in the situation where a long-term contract was not the only conceivable commercial basis on which the parties could be operating. Indeed, there was support for the view that this was an order by order arrangement. For example, Mr Calvert in his evidence said that during the early stages of the manufacturing contract, his former business partner, Brian Lankshear, wanted Loktronic to get some control over NHEL. Mr Calvert explained that Mr Lankshear sought to formalise this by having Loktronic take a shareholding in NHEL. Mr Calvert raised this with Mr Hingston a number of times. Mr Hingston’s response was that a formal shareholding was unnecessary because what was important was the “integrity of the people behind the deal”. Mr Calvert continued:

I recall that he said that a handshake agreement between two people of principle was worth far more than a written agreement where one party’s integrity was questionable. We shook hands again confirming the agreement.

Mr Hingston confirmed he had resisted Loktronic taking any shareholding in NHEL.

[61] Accordingly, the fact Mr Hingston accepted he was the sole supplier to Loktronic was not a critical concession.
[62] Mr Hingston’s view that this was an order by order arrangement was also reflected in his note to Mr Dean. In the note, Mr Hingston explained how the Loktronic/NHEL arrangement worked and, he said:

From the start ... to the present date we have had totally separate companies with no formal “tie-up” between each other.

Given that view, we consider that more was required to show that his view was not genuinely held. Instead, it appears that the Judge has applied an objective standard. How else can the conclusion be explained, given the Judge had earlier described Mr Hingston as commercially inexperienced and naive?

[63] Moreover, it does appear that Mr Hingston did make some, albeit limited, inquiries of his lawyer. Again, that is not necessarily consistent with the proposition that he had such grounds for doubting his position that he turned a blind eye to the reality. Mrs Grant posits that the inference can be drawn that Mr Dean’s advice must have been negative. That is because Mr Hingston was not candid about what Mr Dean told him. However, it was never put to Mr Hingston that he was being less than candid and nor was the claim advanced against Mr Hingston on the basis he ignored legal advice. Of course, inferences can be drawn in this area but the concomitant of that is where it is essentially suggested an asserted belief is not honest, that should be put to the witness.^[47]
[64] We also note that Mr Hingston and his son met with Mr and Mrs Calvert and the Calverts’ lawyer on 19 July 2002. The discussion encompassed the strengths and weaknesses of both companies and the advantages and disadvantages of NHEL and Loktronic continuing together. Mr Hingston accepted Mr Calvert would not have understood termination was on the cards. The Judge accepted Mr Calvert’s evidence that he did not appreciate the nature or significance of the approach made to Mr Hingston and did not realise change was imminent. For that reason, not much significance was placed on the meeting. While we take no issue with that approach, Mr Hingston’s willingness to meet is at least consistent with his maintaining an open mind.
[65] The question is whether the Judge’s finding^[48] that Mr Hingston was indifferent to whether NHEL had any contractual obligations to Loktronic can be sustained. We consider that, if the matter is looked at on a subjective basis, the conclusion that Mr Hingston had the requisite knowledge was not open. It follows there was an error on this point. The finding of tortious liability against Mr Hingston could not be established.

Mr Diver

[66] As we have noted, Mr Diver was on the Trimec board. His company was contracted by the German company effeff initially to advise it on the acquisition of Trimec. It was accepted on behalf of Mr Diver that in that role he made inquiries as to whether there was a contract between Loktronic and NHEL. His essential contention is that he made inquiries of the appropriate person, Mr Hingston, and relied on the assurances Mr Hingston provided. Mr Diver obtained indemnities and got advice about Loktronic’s patents. In cross-examination, Mr Diver emphasised that he:

... relied on [Mr Hingston’s] fervent repeated statements that he was not under any contractual relationship with Mr Calvert and Loktronic and moreover that he was prepared to back that up with an indemnity.

[67] Mr Diver was then asked about his knowledge of the parties’ arrangements and the following exchange took place:

Given the long period that you knew that Mr Hingston had been exclusively supplying the bolts to Loktronic, it must have come as a surprise to you that Mr Hingston said that there was no obligation on the company to supply Loktronic, is that correct?...I said to him repeatedly, are you sure, are you absolutely sure on this. Yes I am. Are you prepared to give us an indemnity. Yes I am, I have no contractual relationship with Loktronic and I believe that’s part of the basic discussion that continues today.

Mr Hingston’s not a lawyer is he?...No. That’s why we needed an indemnity.

[68] Courtney J considered while in some circumstances an assurance of the kind obtained from Mr Hingston would be sufficient to defeat the claim against Mr Diver, that was not the case here. The Judge relied on Mr Diver’s knowledge of the parties and their arrangements. The key finding was as follows:

[83] ... I do not consider that Mr Diver was either entitled to, or in fact, did fully accept what Mr Hingston said. It must have been apparent to Mr Diver that Mr Hingston was commercially naive. Mr Diver, however, was not. He was in the difficult position of being given an assurance which contradicted his own knowledge. It was not practical to make enquiries of Mr Calvert. Mr Diver could, however, have done more in terms of his enquiries with Mr Hingston. Faced with a person of limited commercial understanding it was a straightforward matter to require Mr Hingston to obtain advice from a solicitor or even to have discussed the matter himself with NHEL’s solicitor. Mr Diver could also have obtained legal advice himself; in evidence he said, somewhat ruefully, that it had not been considered necessary for Trimec to obtain legal advice because the proposed transaction with NHEL was so small.

[69] Courtney J went on to find that Mr Diver “chose to accept” Mr Hingston’s assurances although they conflicted with all he knew about the arrangement between NHEL and Loktronic. The Judge put it in this way:

[84] ... Had Mr Diver genuinely turned his mind to the totality of the information that he had it is inconceivable that he would have accepted Mr Hingston’s assurances at face value. In these circumstances I find that Mr Diver proceeded with indifference as to whether NHEL entering into the joint venture would amount to a breach of its contract with Loktronic. This is a finding that I do not make lightly because Mr Diver was an impressive witness and one whose evidence I accept as generally reliable.

[70] For two reasons, we consider the conclusion that the knowledge threshold was met in relation to Mr Diver was not open.
[71] First, the test applied moves between the subjective and objective. To the extent an objective test has been applied, that is not correct as a matter of law. Factually, Mr Diver made inquiries of the person who should know (Mr Hingston), made proper inquiries about the patents, and Mr Hingston was willing to back up his declarations with a legal commitment. Again, how likely it was that Mr Hingston’s assurances were correct had to be assessed against the fact a long-term contract was only one conceivable way the relationship between NHEL and Loktronic could have been arranged.
[72] In supporting the Judge’s conclusion, Mrs Grant emphasised Mr Diver’s expertise and knowledge. He has an MBA and had been a mergers and acquisitions specialist for a number of years, in addition to his trade roles. Further, Mr Diver knew of the lengthy relationship between NHEL and Loktronic. Through his earlier work for Loktronic he also knew of the efforts Loktronic had made in developing its markets for the lock. We agree that not much weight can be placed on the fact Mr Diver was employed as an adviser. That is because it was accepted he was also a strategist.^[49] These matters in an objective sense all support the proposition that Mr Diver ought to have known (“it must have been apparent”) there was a contract or that there was a need for further inquiries. But the focus had to be on his state of mind and, here, whether he did or did not in fact accept the assurances.
[73] Our second point is that before the conclusion could be drawn that Mr Diver did not believe those assurances, that proposition had to be put to him.^[50] Mr Diver was, however, never asked whether he believed the assurances and, if so, why. In this context, the Judge placed some reliance on the fact Mr Diver must have been aware that Mr Hingston was commercially naive. Again, that was never put to Mr Diver.
[74] It was not therefore possible to get to the position discussed in Swiss Bank Corporation v Lloyds Bank Ltd.^[51] In that case, Browne-Wilkinson J said it was not sufficient to avoid tortious liability to show there was room for honest doubt about which rights had priority:^[52]

... if when such doubt exists a defendant chooses to adopt a course which to his knowledge will undoubtedly interfere with the plaintiff’s contract on one view of the law, ... he must at least show that he was advised and honestly believed that he was legally entitled to take that course.

[75] Mr Diver did make inquiries and says he accepted the response. Much was made of the reference in the board paper of which Mr Diver was a co-author to NHEL’s relationship as “contract manufacturer” for Loktronic. We accept that was part of the factual matrix but the weight to be attached to it had to be considered in light of Mr Diver’s essentially unchallenged evidence that he had relied on what Mr Hingston told him. The board paper otherwise is arguably equally consistent with an understanding that the proposed acquisition did not involved an unlawful infringement of Loktronic’s rights. Certainly, Mr Diver’s acceptance of Mr Hingston’s assurances is not demonstrably false. In that situation, where his acceptance is not directly challenged, the only conclusion must be that he had an honest belief in the veracity of what Mr Hingston said.
[76] For the same reason, this case is distinguishable from Tullet Prebon Plc v BGC Brokers LP.^[53] In that case, Jack J made the point the plaintiff did not have to show the defendant positively intended the brokers should be in breach of contract with the plaintiff when they left the plaintiff’s employment.^[54] Lesser states of mind were sufficient.^[55] It was sufficient that the defendant intended that the brokers should leave, whether or not they had good grounds for claiming constructive dismissal. This intention showed that the defendant had no honest belief that a contract breach would not result from the brokers leaving their employment.
[77] For these reasons, we do not consider that liability for Mr Diver under this head of claim was established.

Mr Bowyer and Trimec

[78] Mr Bowyer, a certified electronic engineer by trade with experience in the marketing and financial aspects of a business, founded the predecessor to Trimec. When Trimec was set up, Mr Bowyer and Mr Luker were the joint directors and shareholders. Trimec had been Loktronic’s New Zealand distributer since mid-1992.
[79] Mr Bowyer was aware that NHEL or Mr Hingston manufactured product for Loktronic. He had met Mr Hingston in 1993 and saw him as a competitor. He said Trimec sought assurances from Mr Hingston about the contractual arrangements with Loktronic and relied on what Mr Hingston said. Mr Bowyer’s position is set out in two passages in cross-examination. In the first excerpt, Mr Bowyer was being asked whether he intended to cover the possibility that Loktronic might sue for breach of contract when he obtained an indemnity from NHEL/MANZ. He said this:

...Yes, however, at that time I didn’t know what Loktronic would or would not sue for because I didn’t really know that we were breaching any legal issues and if we were that is why we sought an indemnity from Hingston. We had to recognise that we were talking about a relationship that had gone on for some years and buying into that is likely to have some unknown factors in it.

[80] Later, he was asked about meeting Mr Hingston and his knowledge that Mr Hingston had been manufacturing the electronic bolt for Loktronic for a lengthy period. The exchange continued:

Your evidence is that Mr Calvert introduced Mr Hingston to you as his manufacturer isnt it?...yes

So you knew in 1993 that that was Mr Hingston’s position didn’t you?...yes

You didn’t ask Mr Calvert in 2002 whether he considered that there was a legally binding agreement with Hingston Engineering did you?...No as I say I don’t remember having any interest in the relationship between [Mr Calvert] and [Mr Hingston] at that time

You didn’t seek any legal advice as to whether such an agreement would be legally binding did you?...In 1992

In 2002?...No I think I relied on Mr Hingston confirming that there was no binding relationship.

[81] As to Mr Bowyer’s knowledge, the Judge again makes the point that he would have been aware of Mr Hingston’s commercial naivety. The Judge also found that Mr Bowyer knew from information he had acquired previously from Loktronic that there was a contractual arrangement, although he did not know the details. He knew that NHEL’s only client was Loktronic and that Loktronic did not use any other bolt manufacturer.
[82] Courtney J said the question was whether Mr Bowyer had accepted Mr Hingston’s assurance or whether he turned a blind eye. The Judge found that:

[90] ... Mr Bowyer was also prepared to accept the risk that a contractual arrangement existed between NHEL and Loktronic and, with the comfort of the indemnity given by NHEL, was indifferent to the true position. Mr Bowyer is, however, only liable personally if he intended to injure Loktronic by his actions. It will be apparent from my discussion regarding Mr Hingston and Mr Diver, that Mr Bowyer did hold this intention; he was acting to advance Trimec’s interests by securing NHEL’s manufacturing services for Trimec. This could only be achieved by NHEL breaching its contract, as he (constructively) knew. I find that Mr Bowyer is personally liable for inducing Trimec to breach the manufacturing contract.

[83] The appeal against this finding succeeds on the same basis as that relating to Mr Diver. Essentially, if Mr Bowyer’s state of mind is considered subjectively, there was no basis to conclude that Mr Bowyer did not believe Mr Hingston’s assurances. It was not put to him that he disbelieved Mr Hingston. The high point was, rather, the suggestion he was willing to “take a punt” in reliance on the contractual indemnities. However, insistence on an indemnity is not necessarily an indication of acceptance of a risk or of a deliberate choice not to make inquiries. Further, while Mr Bowyer knew of the parties’ relationship and even of its exclusive nature, it does not necessarily follow that there was a long-term contract as the Judge would ultimately find.
[84] In relation to Mr Bowyer (and the other appellants), Mrs Grant relies on the strategy she says was apparent in the board paper. The essence of the strategy was what was described in the board paper as a “seamless transfer” of the business from Loktronic to Assa Abloy. Added to that was the implication that moving quickly would “minimise Peter Calvert’s ability to re-produce the dropbolt in China with a sharp effect on his business”. This sharp effect was seen in the board paper as a means of protecting the proposed investment and indeed did result, Mrs Grant says, in the end of Loktronic and all its efforts to develop and build its business. Reliance is also placed on Lord Hoffman’s statement that the objective of the law in this area is “to enforce basic standards of civilised behaviour in economic competition”.^[56]
[85] The cross-examination of Mr Bowyer reflected the submission to us that there was a strategy to undermine Loktronic’s business. If the Judge found there was such a strategy, that could assist in forming a view of Mr Bowyer’s belief. But we consider that more was required to show he did not, in fact, rely on Mr Hingston’s assurances.
[86] As to Trimec’s liability, it followed because of the knowledge of its directors, Messrs Bowyer, Diver and Brandt. The claim against Trimec based on the knowledge of the first two falls away with our earlier conclusions. As to Mr Brandt, the Judge found he “knew of the existence of Loktronic’s independent manufacturer”.^[57] This finding seems to reflect evidence from Mr Calvert in re-examination. Mr Calvert recounted a discussion with Mr Brandt on some earlier occasion when Mr Calvert said he told Mr Brandt that all of Loktronic’s manufacturing was by “contractual arrangement”. Mr Brandt was not a party to the proceedings and he did not give evidence. Knowledge of the relationships was not sufficient, absent more, to meet the subjective knowledge requirement for the tort.
[87] The appeal against liability of Mr Bowyer and Trimec under this head also succeeds.

Assa Abloy NZ Limited (AANZL)

[88] AANZL was a member of the Assa Abloy group of companies. Assa Abloy became the owner of Trimec. In terms of AANZL, Messrs Diver and Bowyer were not on the board at the relevant time but Mr Norcott was. Mr Norcott also chaired the board of Trimec. Accordingly, the Judge considered that AANZL could only be liable as a result of Mr Norcott’s actions.
[89] As to Mr Norcott’s knowledge, Courtney J determined that the board paper provided Mr Norcott with the essential information about the relationship between Loktronic and NHEL. The Judge put it in this way:

[94] ... From it, he knew that NHEL was Loktronic’s contract manufacturer and that NHEL had no other clients. Mr Norcott could not have known the terms of the contract ... . The unmistakeable fact that emerges from the information, however, is that there was a contract between Loktronic and NHEL.

[90] Courtney J did not consider it was tenable to suggest that Mr Norcott did not know of the manufacturing and distribution contracts. The Judge saw the real question as whether AANZL was fixed with that knowledge and, if so, whether there was any act attributable to it that would render it liable for the tort of inducing breach of contract. There were two factors the Judge considered relevant. First, Trimec and AANZL were part of the same group and Mr Norcott had responsibility for the group’s activities in the Asia- Pacific region. Second, Mr Norcott’s influence on the Trimec board was aimed at improving the group’s position, not that just of Trimec. Given these factors, the Judge considered AANZL was fixed with the necessary knowledge. But, the Judge found, in so far as the Trimec distributorship was concerned, Mr Norcott was motivated by AANZL’s interest, not those of Trimec. Mr Norcott knew of the distributorship and intended that it be moved to AANZL for the benefit of AANZL and the wider group. Courtney J continued:

[100] Although there was no direct relationship between Trimec and AANZL ..., I am satisfied that Mr Norcott acquired knowledge in his capacity as chairman of Trimec and used that knowledge to benefit the New Zealand Assa Abloy companies, particularly AANZL ... who was the initial recipient of the Trimec distributorship ... . For these reasons I find that AANZL ... is fixed with the knowledge that Mr Norcott had about both the manufacturing and distribution agreements.

[101] The same evidence answers the question as to AANZL’s ... intentional actions. It was Mr Norcott’s decision to pursue and secure the electronic bolts. It was Mr Norcott’s decision to finalise the [JVA] with NHEL. During at least one meeting between Mr Diver, Mr Bowyer and Mr Hingston, recorded in a file note of Mr Hingston’s, there is discussion about the possibility of employment by Matthew Hingston and Interlock. I find that in advancing the joint venture, Trimec was doing so, in part, as a means of advancing the interests of AANZL ... by securing the Trimec distributorship for it. I therefore find that AANZL ... did intend to induce NHEL to breach the manufacturing agreement and Trimec to breach the distribution agreement.

[91] The same issues arise for Mr Norcott’s knowledge as we have discussed for the various other appellants. It is also difficult to see how Mr Norcott could have the requisite state of mind if Mr Bowyer did not. There is an additional issue in relation to Mr Norcott, namely, that he was not a party to the proceeding and did not give evidence. Courtney J was alive to this issue and sought further submissions on the matter after the conclusion of the trial. Further argument on the point did not rectify the gap in the pleadings, nor was it sufficient to address natural justice considerations. In the end, Mr Norcott’s reputational interests, at least, were at stake and he should have had the opportunity of representation to defend himself.
[92] The appeal succeeds in relation to the claim against AANZL for inducing a breach of the manufacturing contract.

Inducing breach of the distribution contract between Loktronic and Trimec

[93] We turn then to the appeals by Mr Bowyer and AANZL against the finding that they were liable for inducing a breach of the distribution contract between Loktronic and Trimec.
[94] Trimec’s notice of appeal also included a ground based on this aspect. However, it is common ground that Trimec cannot be liable for inducing a breach of its own contract. The Judge made no finding on this in the course of the judgment but, in what appears to be a typographical error, a finding against Trimec is included in the conclusion of the judgment. We agree Trimec cannot be liable under this head.

Mr Bowyer

[95] Mr Bowyer’s evidence was that Trimec was appointed as Loktronic’s distributor on a handshake agreement. He said the agreement was never reduced to writing despite requests from Mr Calvert of Loktronic to put the arrangement on a more formal footing. Mr Bowyer said he took this position because he wanted to retain flexibility. He also said he had adopted this approach to other business arrangements and it had worked well. Mr Bowyer also referred to Mr Diver’s surprise about the lack of formality. Mr Bowyer noted in evidence-in-chief:

I explained to Mr Diver that this informality was a purposeful feature of Trimec’s business arrangements which, although unwritten, were built on a foundation of strong relationships. The strength of these relationships was demonstrated by the ongoing continuity of supply which Trimec had enjoyed since its inception.

[96] Courtney J’s finding was as follows:

[91] I have found that Mr Bowyer was also aware of the distribution agreement and I am satisfied that he acted in effecting the breach of it by Trimec, with an intention to harm Loktronic. As I have already accepted, Mr Bowyer did not desire the termination of the distribution agreement. That was, however, an end that Mr Norcott did desire because it was a means of improving Assa Abloy’s overall position. I find that when Mr Bowyer wrote terminating the distribution agreement he was doing so in furtherance of this end. He may have done so reluctantly but he nevertheless did so for the purpose of furthering Assa Abloy’s commercial interests and that purpose could only be achieved through the elimination of Loktronic from the Assa Abloy distribution chain. I therefore find that Mr Bowyer is liable for inducing Trimec to breach the distribution contract.

[97] In support of this finding, reference is made to the board paper as showing that Loktronic’s inability to compete was more than a mere consequence of the acquisition, and was a desired result. The submission is that this intention did not alter with the change from a buyout of NHEL to the JVA. Further, Mrs Grant notes that Mr Bowyer had a financial motive to increase Trimec’s earnings. He stood to gain significantly from the buy-out of Trimec by effeff if Trimec’s earnings increased beyond the specified point. Finally, reference is made to Mr Hingston’s statement that Mr Bowyer told him to treat the proposed arrangements as confidential. This is seen as indicative of a strategy to hit and run at Loktronic’s expense.
[98] We accept these are matters which may assist in assessing Mr Bowyer’s state of mind. However, the Judge had to reject Mr Bowyer’s evidence that he operated on an informal basis to make the findings she did. It was not directly put to him he did know there was a contract. Neither did the Judge spell out the basis for the conclusion he was aware of the distribution agreement. The basis for liability was not established.

AANZL

[99] AANZL’s liability in relation to the distribution contract turns on Mr Norcott’s knowledge. The appeal against this finding succeeds on the same basis as that concerning the claim of inducing breach of the manufacturing contract. Namely, Mr Norcott was not a party to the proceeding. His knowledge was not tested in evidence and the matter needed re-pleading so he could be represented and defend the claim if he chose to do so.

Interference in business by unlawful means

[100] There is no dispute that the relevant legal principles are as set out by Courtney J. The Judge adopted the approach of Lord Hoffmann for the majority in OBG who stated:

[47] The essence of the tort therefore appears to be (a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant.

[101] Importantly, for present purposes, Lord Hoffmann also said that:

[49] ... [A]cts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss.

...

[51] Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of the third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant.

[102] Courtney J saw the issue of intention as significant in the present case. Her Honour noted that in this context intention required a distinction between an intended end and the unintended consequences. Courtney J referred to the following observation of Cooke J in Van Camp Chocolates Ltd v Aulsebrooks as follows:^[58]

If the reasons which actuate the defendant to use unlawful means are wholly independent of a wish to interfere with the plaintiff’s business, such interference being no more than an incidental consequence foreseen by and gratifying to the defendant, we think that to impose liability would be to stretch the tort too far.

[103] Courtney J considered that where the intention was to enrich oneself, if the means adopted to achieve that end causes loss, then there will exist an intention to cause loss.
[104] We turn then to the three aspects raised under this tort on appeal. First, there is an appeal against the finding of unlawful means involving interfering with the manufacturing and distribution contracts. The outcome of this appeal follows that concerning inducing breach of these contracts. This part of the appeal is accordingly allowed.
[105] The second aspect relates to alleged deliberate misrepresentations by Mr Bowyer and Mr Diver. Courtney J found that Mr Bowyer and Mr Diver misled Mr Hingston into thinking that Loktronic’s contract with effeff was at risk and that NHEL’s position as the manufacturer of the electronic bolt was also at risk, and that this amounted to interference by unlawful means. This finding was based on two alleged misrepresentations. The first was that effeff was intending to stop ordering from Loktronic and the second that Loktronic was looking at shifting manufacture of the bolt to China. A third aspect relates to inducing breaches of the effeff contract. We deal first with the misrepresentations.

Misrepresentations

[106] There is no dispute that, as the Judge said, a deliberately misleading statement made to Mr Hingston would, if actionable, constitute an unlawful means. We see this part of the appeal as turning on whether the factual findings were open to the Judge. Accordingly, we need to consider the evidence and how the Judge approached that evidence. It is important to note at the outset that neither misrepresentation was pleaded. That factor has, not surprisingly, coloured the way in which this issue was dealt with in the evidence.
[107] We start first with Mr Hingston’s account. Mr Hingston’s evidence-in-chief was that when he met with Mr Diver and Mr Bowyer to discuss the JVA, they discussed with him the risk of not entering into the JVA. Mr Hingston explained that one of the matters that had emerged from the discussions with Messrs Bowyer and Diver was that Loktronic had been approached by effeff, who wanted to buy Loktronic. Mr Hingston’s unchallenged evidence was that at the same time he was told that:

... effeff were not happy with the situation with Loktronic and they were looking at not buying any more bolts from Loktronic if Mr Calvert was involved. So we could see the writing on the wall, that is – the lock company who were the biggest in the world ..., were not going to be buying from Loktronic and if they were not going to be buying from Loktronic we would have nothing to make if we stayed with Loktronic. And if we had nothing to make we have no future. So I had no job and my son had no job.

[108] The question of Loktronic shifting manufacturing operations to China arose in the context of Mr Hingston’s concerns about the future of the relationship with Loktronic. Mr Hingston said that Mr Calvert “regularly complained” about NHEL’s prices for the drop bolts. He stated that Mr Calvert told him “he was looking for other suppliers in China who could supply components for NHEL’s locks”. Although Mr Hingston initially said that he was concerned Mr Calvert “may eventually look to have the entire drop bolt made in China”, in cross-examination, Mr Hingston agreed that Mr Calvert had not said he was going to have the bolts themselves made elsewhere.
[109] We interpolate here that Mr Calvert denied any knowledge of Mr Hingston’s concerns about the relationship. His position was that their only discussions about the use of Chinese manufacturers arose in the context of the possibility of producing an alternative, lower end product to compete with the cheaper products coming in from Asia.^[59]
[110] Mr Hingston also said Trimec had a role in forming his belief about Mr Calvert’s intention. In his evidence-in-chief, Mr Hingston put it like this:

In fact, Matthew [Hingston] and I had been led to believe by Trimec that Mr Calvert was already investigating Chinese manufacturers and suppliers and this was a factor that influenced our decision to go with Trimec rather than stay with [Loktronic]. We knew that Andrew [Calvert] had investigated Asian solenoid suppliers, so we were concerned that NHEL’s role as manufacturer could be taken from us.

[111] When asked who it was at Trimec who had told him this, Mr Hingston said he “guess[ed] that would be” Mr Bowyer. He thought the discussion probably took place at their first meeting in Sydney at which Mr Diver was also present.
[112] On re-examination, Mr Hingston confirmed his position was that Mr Calvert had never said that he was going to have the bolts made elsewhere. He was asked to explain his concern. Mr Hingston said:

... I don’t quite know how it was all going with them. I know they had taken solenoids to – I think – to China to get priced there. They had certainly looked at getting component parts made off-shore. And I could see the whole thing sliding away if that’s the way they wanted to go.

[113] Mr Hingston said that when Mr Bowyer had led him to believe Loktronic was looking to manufacture in China, he had not raised that with Mr Calvert. He continued:

...Um – I think that when China had ever been talked about I’d sort of made my position fairly clear that I wasn’t very keen on doing that because I could see it all sliding away. We certainly had talked about the manufacture of some components and getting parts from China.

Who had talked about it?...I had talked about that with Peter Calvert and with Mrs Calvert probably at meetings, yes.

And so you had made known that you had concerns about that?...Not at the time of all this happening, but prior to that it had come up from time to time.

That year or the year before?...Oh –

Or earlier?...I would guess that year.

[114] Mr Hingston was also questioned about the Calverts’ response to his concerns. He explained:

...They always thought that my prices were too expensive and they were looking for cheaper manufacture. I think they thought that it was something that we would have to do eventually to remain competitive. I felt that I was under a fair bit of pressure to get involved with going to China, but it didn’t seem to be doing me any good because my part would come, somebody else would assemble the stuff and I would have no business left.

[115] Mr Hingston said they probably had discussed it on more than one occasion but:

... [I]t was never a great in-depth discussion about it, just sort of mentioned in passing from time to time. I remember at one point the sons were going to Singapore and they asked if they could take some solenoids because they wanted to get a price from someone in Singapore or somewhere else in Asia – that sort of thing.

[116] Mr Bowyer’s evidence was that they were aware that Mr Calvert “may have been looking to reproduce [the] bolts in China and had maybe established relationships in China”. The concern was to act quickly before Mr Calvert could begin manufacturing in China and so be a competitor to the business Assa Abloy thought it was buying. Mr Bowyer was asked whether he had told Mr Hingston that Mr Calvert was looking to set up an alternative manufacturer. Mr Bowyer said:

...actually I think – I really do believe it was Mr Hingston told me, not me told him.

[117] In relation to the knowledge of Messrs Diver and Bowyer on these matters we refer to two passages from the board paper. It recorded that Loktronic had “a difficult” relationship with its distributors. Effeff, IEC (UK) and Alarmcom (Singapore) were referred to in this context. The difficulties were ascribed to Mr Calvert’s inflexibility in product development, variability in manufacturing quality and personality conflicts. The relationship with effeff was also described as “increasingly awkward”. As noted earlier, the board paper referred to the fact Loktronic was looking for “an alternative contract manufacturer”. There was also a reference to Mr Calvert’s ability to reproduce the bolt in China. Mr Diver explained in evidence that it was thought Mr Calvert could have got the bolt made in China.
[118] Mr Diver could not recall the source of the information in the board paper about the deterioration in the NHEL-Loktronic relationship leading to Loktronic’s search for an alternative contract manufacturer. He thought it would probably have come from Mr Hingston, but that was his “best guess”. Mr Diver of course had been involved in negotiations over the initial effeff contract in his role, then, as adviser to NHEL.
[119] As we have noted, Courtney J concluded that Mr Bowyer and Mr Diver misled Mr Hingston into thinking that Loktronic’s contract with effeff was at risk and that NHEL’s position as the manufacturer of the electronic bolt was at risk.^[60] The Judge considered that this statement was a deliberate misstatement because Mr Bowyer and Mr Diver knew that Loktronic had a four year contract with effeff so there was no basis on which they could genuinely have thought Loktronic’s relationship with effeff was at risk. Courtney J took the view that Mr Diver’s evidence that Mr Hingston was the source of the comment in the board paper was inconsistent with Mr Hingston’s unchallenged account.
[120] In respect of the prospect of Loktronic having the lock made in China, the Judge noted Mr Hingston’s evidence that he had been led to believe Mr Calvert was investigating Chinese manufacturers and that this was a factor influencing his decision to proceed with the JVA. The Judge recorded Mr Hingston’s evidence that he thought it was Mr Bowyer who had made that statement although Mr Bowyer believed it was Mr Hingston who told him that. As to the material in the board paper, the Judge said:

[111] .... Mr Diver could not recall where he got that information from and thought it probably came from Mr Hingston. However, that would be inconsistent with Mr Hingston’s unchallenged account of the discussion. Mr Hingston said (and I find this to be the case) that Mr Calvert had never told him that he was going to have the bolts made elsewhere. Mr Hingston did have some worries but they were based on the fact that Loktronic had priced some components off-shore.

[121] In terms of the statements about the effeff contract, Mr Kennedy for Mr Bowyer points to a number of factors from the evidence supportive of the truth of the proposition that there were risks attached to the contract with effeff. First, although the Judge proceeded on the basis that the effeff contract continued until May 2004, the contract itself was expressed to expire on 31 March 2003, less than a year after the joint venture negotiations began in June 2002 with Mr Hingston. There is some handwriting on the typed contract which was before the Judge supportive of the May date but no evidence as to whose handwriting it was or the significance, if any, it had. There was some discussion about this in the evidence. Mr Calvert said the effeff contract was going to run on until the middle of 2004. Mr Diver accepted there was a binding 10,000 piece contract but he said he did not know whether that order had been fulfilled. However, the contract itself suggests the correct position was as the Judge initially stated, that is, the effeff contract was for three years from 1998 but the three year period was later extended to 2003.^[61]
[122] Second, there had been some problems with quality initially. However, in the letter from effeff to Mr Calvert in early April 2000, in which Mr Diver had a hand, confidence was expressed in continuing the arrangements for the length of the contract.
[123] Third, the contract could have expired earlier, on the delivery of 10,000 bolts. There is no evidence as to whether that point had been reached.
[124] Finally, in cross-examination, Mr Diver was asked about the passage in the board paper suggesting that Loktronic had a difficult relationship with its distributors. He was asked whether once the problems with effeff had been resolved there was “no difficult relationship after that period”. Mr Diver’s response was “that’s not what Mr Brandt advised me”. He went on to say that Mr Brandt advised him that his relationship with Mr Calvert was problematic, as was recorded in the board paper. It is relevant in that regard that Mr Brandt was of course a board member of both Trimec and effeff and may have been expected to have some knowledge of the situation.
[125] More importantly, in our view, the difficulty which has resulted from the absence of pleading of misrepresentations comprising the unlawful means is that there was no evidence that either Mr Bowyer or Mr Diver did not believe the statements to be true.^[62] No suggestion to the contrary was put to them in cross-examination. Further, the contemporaneous document, that is, the board paper is in fact supportive of a belief in the truth of these statements, accepting for these purposes there is sufficient evidence that the statements were made by Mr Bowyer in the presence of Mr Diver at their meeting in Sydney.
[126] Accordingly, the appeals against the finding of interference in business by unlawful means succeed.

Inducing breach of the effeff contract

[127] The Judge found that in his evidence Mr Bowyer said that within a day or two after the meeting on 23 July 2002 he advised both IEC and Express Alarms/Alarmcom that Loktronic’s manufacturing arrangement with NHEL and its distribution arrangement with Trimec had both ended but conveyed that NHEL would supply product to Trimec and that new orders for the bolts would be met by Trimec under the new joint venture.
[128] On 24 July 2002, IEC’s managing director contacted Mr Calvert thanking him for his past service and expressing concern for the future. He referred to a telephone call he had had from Mr Bowyer. When Mr Calvert contacted the managing director of Alarmcom later in the day he was told that Mr Bowyer had already been in touch. The Judge continued:

[114] The reality may well have been that Loktronic could not continue to supply effeff, IEC or Alarmcom. However, on 23 July 2002 that was, as yet, unknown. It is clear on Mr Bowyer’s own evidence that he interfered with these relationships. I find that his actions amounted to interference by unlawful means through inducing a breach of the contract with effeff (by ensuring that Loktronic could no longer perform its supply obligations). I stop short, however, of finding that Mr Bowyer induced breaches of contract with IEC and Alarmcom because the evidence was not clear as to the nature of the arrangements with these customers.

[129] It is unclear the extent to which Mr Diver has liability in this respect. The finding of liability is limited to Mr Bowyer.^[63] However, the summary at the end of that section of the judgment and comments made in the context of the conspiracy claim suggest it has been decided that Mr Diver has liability under this head.^[64] The relevant particulars in the pleading are directed to Mr Bowyer.
[130] In any event, liability under this head is dependent on a finding of primary liability, that is, the liability of Loktronic to effeff.^[65] No finding has been made on that. In those circumstances, we consider that it is not sufficient to say that the actions of Messrs Bowyer and Diver interfered with the ability of effeff to trade with Loktronic and that effeff could have sued for wrongful interference with its contract. There is no evidence that the effeff contract has been breached.
[131] For this reason, this part of the appeal succeeds.^[66]

Conspiracy to interfere with the manufacturing contract by unlawful means

[132] Liability under this head (Messrs Bowyer and Diver and Trimec) follows that in relation to interference in the contract by unlawful means. This part of the appeal also succeeds.

Other matters

[133] Because of the approach we have taken, we have not found it necessary to deal with any of the other bases for the appeals, for example, that the Judge was wrong to attribute liability to the various appellants having also found that those who were directors at the time acted within the course of their authority.^[67] Nor do we address the appeals and the cross appeal relating to the award of damages and interest.
[134] We add that it does appear that the case at trial was something of a moveable feast. We take Mrs Grant’s point that some matters were not within Loktronic’s knowledge and so matters shifted following discovery and so on. Regardless of the reasons for the changes, these developments have meant that at times there was insufficient focus in the evidence on matters at issue. This in turn gave rise to certain crucial matters not being put to witnesses. We have identified examples where they have been relevant to our reasoning.

Disposition

[135] For these reasons the appeals by Messrs Diver, Hingston, and Bowyer and by Trimec and AANZL against the findings of liability on the various intentional torts are allowed. The judgment in favour of Loktronic in the sum of $1,420,721 plus interest is set aside. NHEL’s appeal against the finding that the manufacturing contract was exclusive, having been abandoned, is formally dismissed. The cross-appeal is dismissed.
[136] With one exception, costs should follow the event. The exception relates to the appeal brought by NHEL. As we have noted, part of that appeal was abandoned. The other part relating to the damages award was not developed in argument. It is appropriate that costs lie where they fall in relation to that appeal. Accordingly, we make an order that Loktronic must pay Messrs Diver, Hingston, and Bowyer, and Trimec and AANZL costs on a band A basis for a complex appeal. Costs in relation to the appeal by NHEL lie where they fall. We certify for second counsel. Costs in the High Court are to be dealt with in that Court.

Solicitors:
Lowndes Jordan, Auckland for Appellants in CA258/2011
Haigh Lyon, Auckland for Appellants in CA259/2011
Minter Ellison Rudd Watts, Auckland for Appellants in CA260/2011
Baldwins Law Ltd, Auckland for Loktronic Industries Ltd
Appendix
Diagram showing the relationships between parties
(parties to the proceedings in bold)

Effeff

German company. Acquired Trimec

Directors include Martin Brandt and Geoff Norcott

Acquisition

Assa Abloy (Sweden)

Acquired effeff.

Assa Abloy NZ Ltd / Interlock Group Ltd

Subsidiary of Assa Abloy Australia Pacific Ltd.

Geoff Norcott a director.

Assa Abloy Australia Pacific Ltd

Subsidiary of Assa Abloy.

Stephen Diver

Director of SDR Ltd. Was a director of Trimec and AANZL.

SDR Ltd

Consulting company. Acted for Loktronic, effeff and Assa Abloy Group.

Loktronic

Director = Peter Calvert

Distributed Trimec products, bought NHEL bolts, exported to effeff.
Exports

Trimec

Board = Geoff Norcott, Roy Bowyer, Stephen Diver, Martin Brandt

Supplied to Loktronic. Entered into JVA with MANZ.

JVA

Distribution
Agreement

Acquisition

NHEL

Manufactured bolts for Loktronic.

Neil Hingston

Director of NHEL and MANZ.

MANZ

Company set up for joint venture (JVA) with Trimec.

Manufacturing Agreement

^[1] That is, Neil Hingston, Mr Bowyer, Trimec, Mr Diver, and Assa Abloy New Zealand Ltd (AANZL).
^[2] The parties and their inter-relationships are shown in the chart attached as an Appendix.
^[3] Loktronic Industries Ltd v Diver HC Auckland CIV-2008-404-4657, 30 March 2011.

^[4] Interest was awarded at the Judicature Act 1908 rate of 7.5 per cent from 23 July 2002 to 31 December 2008 and at 5 per cent from 1 January 2009 down to the date of judgment. Interest on the judgment debt payable under r 11.27(1) of the High Court Rules was also payable at 5 per cent.
^[5] At [48]–[60].
^[6] Mr Diver was also a director of AANZL for a short period in late 2001.

^[7] Messrs Bowyer and Luker were the founders of Trimec Securities Pty Limited. The company was subsequently renamed Trimec Technology Pty Ltd and Messrs Bowyer and Luker were its joint directors and shareholders.
^[8] At [59].
^[9] At [75].

^[10] Hazel Carty, An Analysis of the Economic Torts (2nd ed Oxford University Press, 2010) at 30–35.
^[11] At 30.
^[12] Lumley v Gye [1853] EngR 15; [1853] 2 E & B 216.

^[13] At 31–32, see also Deakin and Randall “Rethinking the Economic Torts” (2009) 72 MLR 519 at 521–527.
^[14] OBG v Allen [2007] UKHL 21, [2008] 1 AC 1 (OBG).

^[15] John Hughes “Interference with Business Relations” in Stephen Todd (ed), The Law of Torts in New Zealand (5th ed, Brookers Ltd, Wellington, 2009) 601 at [13.2].

^[16] At [13.2].

^[17] Jiao v Barge CA236/05, 19 July 2006; leave to appeal dismissed in Jiao v Barge [2006] NZSC 82, (2006) 18 PRNZ 396.
^[18] OBG at [39] per Lord Hoffmann.
^[19] British Industrial Plastics Ltd v Ferguson [1940] 1 All ER 479 (HL).
^[20] OBG at [39].
^[21] British Industrial Plastics Ltd v Ferguson [1938] 4 All ER 504 (CA) at 513.

^[22] Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 (CA). See also to similar effect: Greig v Insole [1978] 1 WLR 302; [1978] 3 All ER 449 (Ch) at 488.

^[23] At [41]. See Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2001] UKHL 1, [2003] 1 AC 469; and see also Digicel (St Lucia) Limited v Cable & Wireless plc [2010] EWHC 774 (Ch) at [88] per Morgan J: “Knowledge includes ‘shut-eye’ knowledge or wilful blindness”.
^[24] At [42].
^[25] Meretz Investments NV v ACP Limited [2008] Ch 244 (CA).

^[26] At [114]. See to the same effect Digicel at [88].

^[27] At [13.2.04].

^[28] Winstone Wallboards Ltd v Canterbury and Westland Stores, Packing and Warehouse Workers’ Industrial Union of Workers HC Christchurch A308/84, 30 November 1984.
^[29] At 10.

^[30] Mid-Canterbury Industries Limited v The Canterbury and Westland Stores, Packing and Warehouse Industrial Union of Workers HC Christchurch A178/82, 20 August 1982.
^[31] Torquay Hotel Company Ltd v Cousins [1969] 2 Ch 106.
^[32] Citing Brekkes v Cattel [1972] 1 Ch 105 at 1114.
^[33] See [181]–[190] per Lord Hoffmann.

^[34] State Insurance Ltd v New Zealand Motor Body Builders’ Association Inc (1992) 5 TCLR 12 (CA).
^[35] At 19.
^[36] J T Stratford and Sons v Lindley [1965] AC 269 (HL).

^[37] Westpac New Zealand Ltd v Map & Associates Ltd [2011] NZSC 89, [2011] 3 NZLR 751. Followed in Fletcher v Eden Refuge Trust [2012] NZCA 124 in relation to dishonest assistance.
^[38] At [27].

^[39] Manifest Shipping at [25], cited in Map at [28]. See also the discussion of Manifest Shipping by Briggs J in The Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama A.S. [2009] EWHC 1276 (Ch) at 172–174.

^[40] 35 U.S.C. 271(b) states: “Whoever actively induces infringement of a patent shall be liable as an infringer”.
^[41] Global-Tech Appliances, Inc v SEB SA131 SC 2060 (2011).
^[42] At 13 per Alito J for the majority.

^[43] Carty in her text states at 40: “... it is to be assumed that this ‘Nelsonian’ knowledge requires a subjective reckless indifference, given the emphasis in OBG that the ingredient of knowledge required a determination of the defendant’s honest and genuine belief. Lord Hoffman did refer to the defendant making a conscious decision ‘not to enquire in case he discovered a disagreeable truth’”. See also Hazel Carty “The Economic Torts in the 21^st Century” (2008) 124 LQR 641 at 652 cf Deakin and Randall above n 13 at 539.
^[44] Loktronic at [65] and see Emerald Construction at 700–701.
^[45] Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [5].
^[46] At [17].
^[47] Evidence Act 2006, s 92(1); and see Browne v Dunn (1893) 6 R 67 (HL).
^[48] At [75] quoted at [56] above.

^[49] Mr Bowyer described him as playing a “central” part in the acquisition of Trimec by effeff.
^[50] Evidence Act 2006, s 92(1); and see Browne v Dunn (1893) 6 R 67 (HL).
^[51] Swiss Bank Corporation v Lloyds Bank Ltd [1979] 1 Ch 548.
^[52] At 580, emphasis added.

^[53] Tullet Prebon Plc v BGC Brokers LP [2010] EWHC 484 (QB); aff’d by Tullett Prebon Plc v BGC Brokers LP [2011] EWCA Civ 131.
^[54] At [179].
^[55] Citing OBG at [202].
^[56] OBG at [56].
^[57] At [87].
^[58] Van Camp Chocolates Ltd v Aulsebrooks [1984] 1 NZLR 354 (CA) at 360.

^[59] Mr Calvert’s evidence is generally supported by that of Mrs Calvert who said Loktronic was not considering seeking an alternative manufacturer overseas.
^[60] At [111].
^[61] At [51].

^[62] Jack Jacob and Ian Goldrein (eds) Bullen & Leake & Jacob’s Precedents of Pleadings (13th ed, Sweet and Maxwell Ltd, London, 1990) at 426 refer to the failure to care about whether the statement is true or false. We note that the plaintiff(s) do not appear to have sought leave to plead such unlawful means during the hearing on the basis that such pleading was based on conformation with the evidence at trial.
^[63] At [114].
^[64] At [120] and [129].
^[65] OBG at [21] and [49] per Lord Hoffmann and see also at [178]–[180] per Lord Nicholls.

^[66] The liability of Trimec in relation to the misrepresentations and inducing the breach of the effeff contract follows that of Mr Bowyer.

^[67] See Said v Butt [1920] 3 KB 497 in which it was held that if a company breaches a contract, there is not usually personal liability for the company employee who has acted within the scope of employment. See also: Winchester International (NZ) Ltd v Winchester CA226/04, 5 December 2005 at [55].