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Hyzon Motors Inc v Bartlett [2024] NZHC 3687 (5 December 2024)

Last Updated: 12 December 2024

JUDGMENT OF O’GORMAN J

[Formal proof hearing]

This judgment was delivered by me on 5 December 2024 at 4 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

.......................................

Solicitors:

Bell Gully, Auckland

HYZON MOTORS INC v BARTLETT [2024] NZHC 3687 [5 December 2024]

Overview

• [1] The plaintiff, Hyzon Motors Inc (Hyzon), seeks judgment by way of formal proof against the defendant, Michael Bartlett, for deceit and misleading conduct. Hyzon is incorporated in Delaware, United States. It is in the business of designing and producing hydrogen fuel cells that provide zero emission power for trucks and heavy industry. This claim relates to an investment it made in a New Zealand company that it believed operated a complementary business.

• [2] Hyzon says Mr Bartlett fraudulently induced it to pay USD 2,448,000 for shares in Global NRG H2 Ltd (H2), based on false representations that H2 had exclusive intellectual property rights to commercialise revolutionary methods for manufacturing biogas and syngas from waste material, and that it was a company within the Global NRG group operating successfully in more than 50 countries.

• [3] Hyzon now believes those matters were all fabricated, as part of a long-term scam to lure investment payments, and that H2 is (and has always been) just a worthless shell.

• [4] The plaintiff pursues three causes of action:

(a) the tort of deceit;

(b) breaches of ss 9 and 13 of the Fair Trading Act 1986 (FTA); and

(c) breaches of ss 19 and 22 of the Financial Markets Conduct Act 2013 (FMCA).

• [5] The key issues for determination for the deceit claim are:

(a) Given the cross-border aspects, does the Court have jurisdiction and what is the proper law?

(b) Did the defendant make the alleged representations of fact to the plaintiff?

(c) Were those false, and did the defendant knowingly or recklessly deceive the plaintiff?

(d) Did the defendant intend that the representations be relied on?

(e) Did the misrepresentations cause the plaintiff’s payments (and is contributory negligence relevant)?

(f) Has the plaintiff thereby suffered loss?

• [6] For the statutory causes of action:

(a) Do the FTA and FMCA apply to the conduct, given the cross-border aspects?

(b) Was the defendant “in trade” in New Zealand?

(c) Can claims under both statutes arise for the same conduct, along with a claim for deceit?

(d) Following on from the misrepresentation issues, was Mr Bartlett’s conduct misleading in relation to “goods” and “financial products”?

(e) What relief is appropriate as a matter of statutory discretion?

• [7] Mr Bartlett initially took steps to defend the claims, but his defence was eventually struck out for non-compliance with court orders for discovery and interrogatories. The claim has therefore proceeded as a formal proof.

Formal proof hearings

• [8] Under r 15.9(4) of the High Court Rules 2016, the plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the judge to calculate and fix the damages.
• [9] The need to be “satisfied” calls for the exercise of judgement and does not necessarily import any particular burden of proof standard.¹ Subject to that flexibility, the test commonly adopted is the civil trial standard of balance of probabilities.² However, the plaintiff is only required to prove a cause of action so far as the burden of proof lies on the plaintiff. The plaintiff is not required to engage with any matters of affirmative defences, set-off or counterclaim.³

• [10] Where fraud or dishonesty is alleged, the quality of the evidence is expected to be strong — cogency depends on what is at stake.⁴ Even so, the applicable standard does not change, and fraud or dishonesty may be inferred from primary facts,⁵ from circumstantial evidence,⁶ and from adverse inferences.⁷

Factual findings

• [11] For the purposes of the formal proof hearing, Hyzon relied on affidavits from factual and expert witnesses, which exhibited the contemporaneous correspondence between the parties during their commercial dealings, the subsequent correspondence during this proceeding, and other public material such as Companies Office searches. I make the following findings of fact based on that evidence.

• [12] The relevant background began in July 2019, when Mr Bartlett emailed Craig Knight of Horizon Fuel Cell Technologies Pte Ltd (Horizon).⁸ Mr Bartlett claimed to be president of a multi-national group called Global NRG. He said the group’s business included installing microgrids in homes and businesses throughout the world. He said that Global NRG installed an average of 6,000 new microgrids a month. Mr Bartlett suggested Horizon could supply the Global NRG group with

¹ R v Leitch [1998] 1 NZLR 420 (CA) at 428.

2. Mokotupu v Rakei-Clark [2024] NZHC 2412 at [23]; Ferreira v Stockinger [2015] NZHC 2916 at [35]; and Lambert v River [2024] NZHC 1690 at [25].

³ Ferreira v Stockinger, above n 2, at [36].

4. Kea Investments Ltd v Wikeley Family Trustee Ltd (in int liq) [2023] NZHC 3260 at [73], referencing Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [101].
5. Thornley v Ford [2021] NZHC 611 at [39], referencing Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 (HL) at [186].

⁶ Cloverbloom Co Ltd v QBE Insurance (Australia) Ltd [2024] NZHC 2443 at [24]–[26] and [31].

⁷ Burns v National Bank of New Zealand Ltd [2003] NZCA 232; [2004] 3 NZLR 289 (CA) at [75] and [82].

8. Mr Knight was Horizon’s Chief Commercial Officer until September 2019 and its Chief Executive Officer between September 2019 and August 2020.

air-cooled fuel cell stacks to be installed in Global NRG’s microgrids. This was an attractive business opportunity for Horizon, which Mr Knight discussed with Horizon’s George Gu.

• [13] Some significant time after Horizon sent Mr Bartlett a proposal for that supply, Mr Bartlett introduced the idea of a joint venture to produce syngas using manure and other waste products. He claimed to have developed a transformative waste to energy (WTE) technology that could gasify waste plastic into syngas to extract hydrogen or generate energy, at efficiencies never seen before. By January 2020, Mr Bartlett claimed that Global NRG had patented plasma gasification technologies that could generate electricity as much as 60 per cent cheaper than wind or solar.

• [14] Hyzon was incorporated on 21 January 2020 as a subsidiary of a Horizon Fuel Cell Technology company. Following incorporation, Mr Knight became the Chief Commercial Officer, then Chief Executive Office between August 2020 and August 2022. Mr Gu was Hyzon’s Chief Executive Officer until August 2020 and then its Chairman from August 2020 to August 2023.

• [15] In February 2020, Mr Gu for Hyzon and Mr Bartlett for Global NRG Hydrogen Inc signed a memorandum of understanding setting out proposed terms for Global NRG to continue to develop hydrogen manufacturing hubs across the United States to meet anticipated demand from Hyzon’s zero emission trucking operations.

• [16] During March 2020, Hyzon was seeking to raise finance for its operations and invited Mr Bartlett to be a shareholder. Mr Bartlett turned down that opportunity, representing that he was already heavily committed with getting 50 hydrogen hubs up and running in the United States at a cost of USD 12 billion, as well as having other gasification plant construction commitments in Australia and New Zealand.

• [17] During the balance of 2020, Hyzon sought to secure the proposed sale of its fuel cells to Global NRG for its alleged microgrid programme, but no deal was ever concluded.
• [18] Meanwhile, throughout 2020 and into 2021, Mr Bartlett made various representations about:

(a) Global NRG’s established experience in building gasification plants throughout the world (he claimed the group had built over 700 gasifiers in 50 countries, providing various lists to Hyzon).

(b) Global NRG’s plans to make green hydrogen manufacturing plants throughout the world, as an offshoot to its other renewable energy operations (he claimed Global NRG was developing 77 decentralised renewable energy hubs across the United States and 26 across Australia, with others in Netherlands and Germany). By October 2020, he asserted Global NRG has a “present capacity” to make 168,000 tons of green hydrogen per year in the United States.

(c) Global NRG having a range of staff and researchers deployed throughout the world, with proprietary protection for novel technologies they had developed (including trademarks and patents).

• [19] In the above context, in a document dated 6 October 2020, Mr Bartlett proposed that Hyzon could invest in H2, and negotiations continued in accordance with a non-binding statement of intent dated 17 October 2020. The rationale was that this would give Hyzon the legitimate claim to the global ability to manufacture hydrogen at $2/kg, which would greatly support Hyzon’s business in hydrogen-fuelled zero emission trucks. For example, Mr Bartlett said: “[i]t’s our WTE technologies that make it possible and in my opinion the ability to couple your sales to really affordable hydrogen is a huge plus or carrot”.

• [20] Shortly before the investment agreements were signed, Mr Bartlett offered Hyzon the opportunity to visit a couple of Global NRG’s power plants — he suggested that Mr Knight nominate a destination to visit. In part due to COVID-19 restrictions in place at the time, and in part due to the timing difficulties and Mr Bartlett claiming he did not have time to arrange a visit, this was not achieved during October.
• [21] On 31 October 2020, Hyzon entered into two separate agreements to purchase a specified number of H2 ordinary shares, as well as the option to purchase more shares later.⁹ Both agreements were expressly governed by New Zealand law:

(a) The Share Subscription Agreement provided for a first tranche of two lots of 850 shares to be issued at a subscription price of USD 144 per share paid in two instalments (USD 122,400 each), and a second tranche of 15,300 shares to be issued at the same subscription price by 1 July 2021 at the latest (but Hyzon could elect not to proceed with further investment by giving five working days’ advance notice).

(b) The Option Agreement provided for three tranches of share options (77,666 shares for the first two, and 77,668 for the third) at exercise prices of USD 144, USD 150 and USD 160, with exercise dates of six months, 18 months and 30 months after the first operations date.

• [22] Hyzon made three payments under the above agreements — these form the basis of the relief sought (paid to a bank account nominated by Mr Bartlett at St George Bank, New South Wales):

(a) On 29 October 2020, Hyzon paid the first instalment of USD 122,400 for the first tranche of shares.

(a) On 29 January 2021, Hyzon paid the second instalment of USD 122,400 for the first tranche of shares.

(b) On 10 September 2021, Hyzon paid USD 2,203,200 for the second tranche of shares.

9. Although these are drafted as subscriptions for shares to be issued by H2, in fact the shares were transferred from the existing shareholder, Moonshine Oil & Gas Ltd.

• [23] Subsequent attempts by Hyzon to arrange a visit to see a Global NRG power plant were also unsuccessful. Mr Bartlett claimed the plants in the United States required one month’s advance notice to visit, and that the only plant that could be visited around the world was in the Philippines.

• [24] In January 2022, as part of internal Hyzon accounting and audit reviews, concerns were raised about the reliability of Mr Bartlett and the proper value of its investments in H2. This led to Hyzon commissioning an investigative report by Verracorp Pty Ltd. Verracorp reported that:

(a) Mr Bartlett’s websites are designed in a very old-fashioned way and no contact details are available on any of the group websites;

(b) all the company material provided included a number of claims and “wish lists”, but little to no evidence is provided to substantiate any progress, with all the plans appearing to be only on papers;

(c) Global NRG was incorporated in 2007, which was contrary to the claim made by Mr Bartlett that the parent company has been operating since 1976;

(d) the entity that Mr Bartlett claimed would provide finance, Avago Equity Ltd, had been wound up in New Zealand on 25 January 2013, and the BVI company appeared to be a shell company;

(e) despite Mr Bartlett’s claims of having significant experience in the energy/gas industry for most of his career, it appeared that Mr Bartlett was mostly involved in industries like aviation, travel, finance and logistics;

(f) Mr Bartlett had been adjudicated bankrupt in Sydney on two occasions (1977 and 2001), with some of the allegations made against him including misappropriation of funds and engaging in fraudulent activities; and

(g) Verracorp had been unable to verify the claims made by Mr Bartlett due to a lack of evidence.

• [25] Following on from Verracorp’s report, Hyzon retained Bell Gully who commenced this proceeding on 16 September 2022 after no satisfactory response was received from Mr Bartlett to their letters of demand.

Tort of deceit

Jurisdiction and proper law

• [26] Mr Bartlett is 81 years old and the sole director of H2 and Global NRG Ltd, both registered in New Zealand. His current registered address as a director is in Auckland, New Zealand. At the time he filed his statement of defence dated 3 March 2023, he admitted being a New Zealand resident. Since then, it appears Mr Bartlett may have moved to Australia. In any event, he accepted service and took substantive steps to defend the claims. Accordingly, this Court has personal jurisdiction over Mr Bartlett for these claims.

• [27] The claims centre on representations about an investment in a New Zealand registered company, and the applicability of New Zealand statutes to that conduct. Accordingly, I accept that this Court has subject matter jurisdiction.

• [28] In terms of the proper law for the tort of deceit, under s 8(1) of the Private International Law (Choice of Law in Tort) Act 2017, the general rule is that the law of the country in which the events constituting the tort in question occur is the applicable law. However, s 8(2)(c) provides that, where elements of those events occur in different countries, the applicable law is “the law of the country in which the most significant element or elements of those events occurred”.

• [29] I accept Hyzon’s submissions that the statement of intent, the share subscription agreement and the option agreement are significant documents for the tort claim, all expressed to be governed by New Zealand law. The representations relate to inducing an investment in a New Zealand company. In the circumstances, I

consider that the significant events constituting the tort are logically based in this country.

• [30] Furthermore, to the extent that the law of other states could arguably apply,¹⁰ there is no evidence before me that there would be any material difference in the law of the tort of deceit as applied in those jurisdictions compared with New Zealand. A party who does not seek to rely on foreign law need not plead or prove it, and the court applies New Zealand law by default.¹¹

• [31] I therefore proceed on the basis that New Zealand is the proper law for the tort of deceit claim.

Elements of the tort of deceit

• [32] The elements of the tort of deceit are well-established. They are:¹²

(a) the defendant must make a representation of fact;

(b) the representation must be made in the knowledge that it is false or where the defendant is reckless as to its truth (a conscious indifference to the truth);

(c) the representation must be made with the intention that it be relied upon by the plaintiff;

(d) the plaintiff must in fact rely upon the representation; and

(e) the plaintiff must suffer damage as a result.

¹⁰ Such as the law of Australia if Mr Bartlett was there at the time some misrepresentations were made, or the law of the state of New York where Hyzon personnel were located when they were misled and from where the share subscription monies were paid.

¹¹ Maria Hook and Jack Wass (eds) The Conflict of Laws in New Zealand (online ed, LexisNexis) at [3.43].

¹² Kim v Oh [2024] NZHC 1299 at [65], referencing Mount v C & F Legal Ltd [2023] NZHC 653 at [62].

Representations of fact

• [33] As outlined in the factual findings section above, I accept the plaintiff’s submissions that Mr Bartlett made a wide range of representations to Hyzon, falling within the following categories:

(a) Representations as to Global NRG’s business activities: Mr Bartlett presented Global NRG as a busy business empire operating in many countries, with many staff and/or contractors, and with a successful track record in the execution of heavy industry projects across the world. He also presented Global NRG as being bolstered by a series of subsidiaries with interests in gas and oil fields, consumer-related businesses, private equity, and the like.

(b) Representations as to Global NRG’s and his own technology, experience and know-how: Mr Bartlett repeatedly claimed that Global NRG was the only company with the technology and experience to produce green hydrogen cheaply (approximately half the market rate) due to its WTE technology and experience in gasification and other related areas. He told Mr Knight that “[H2] will and can sell green hydrogen at $2/kg. This gives Hyzon an incredible advantage”. Specifically, he claimed that H2 had an exclusive licence to use this technology and know-how, and that this was hugely valuable to Hyzon. He presented Global NRG as having a patent and trademark portfolio that backed up his claims and asserted that he was a WTE expert with more than 40 years’ experience.

(c) Representations as to future profits and conduct: Mr Bartlett’s spreadsheets that he provided to Hyzon claimed that the hydrogen hubs he proposed to build via H2 would be immensely profitable. In doing so, he represented that he honestly believed that those profit forecasts were obtainable, and there was a reasonable basis for that belief.

False with knowledge or recklessness

• [34] In the absence of Mr Bartlett admitting the above representations were false and any intent to deceive on his part, evaluation of this element depends on circumstantial evidence and strong adverse inferences from Mr Bartlett’s failure to produce supporting evidence in discovery. His failure to do so simply cannot be explained.

• [35] The central hook to induce the investment was the claimed ability to manufacture green hydrogen at USD 2/kg, which Mr Bartlett described as a gamechanger that would make “a significant difference to the song sheet” and give an advantage that “none of the others have or can reach yet”. In his answer to an interrogatory, Mr Bartlett said that the hydrogen production hubs were not constructed because the plaintiff failed to manufacture and sell the number of FCEVs that it forecast during the period 2021 to 2023. However, I reject that as entirely inconsistent with the evidence, in which Mr Bartlett repeatedly represented that H2 could already produce green hydrogen at USD 2/kg, and this was not contingent on Hyzon’s potential supply or pricing in any way.

• [36] I accept the plaintiff’s evidence in this proceeding that Mr Bartlett’s technological claims were untrue, and Mr Bartlett knew that. In particular, Hyzon has filed expert affidavits from Matthew Murdock and Michael Fatigati of Raven SR (a renewable fuels company that specialises in WTE technology) explaining why the technological claims by Mr Bartlett should be assessed as baseless:

(a) One of the technologies Mr Bartlett claimed to have invented (flash volatilization) was invented by persons unrelated to Global NRG, and the picture Mr Bartlett used appears to be taken from a Wikipedia page. The evidence of these experts is that this technology is impractical to implement at scale and has no commercial applications.

(b) Mr Bartlett’s claimed ability to produce hydrogen at USD 2/kg relies on assumptions about the availability of feedstock of a kind and quantity that do not exist and makes incorrect assumptions about the cost of waste plastic and the availability of tax credits.

(c) Mr Bartlett’s proposal to build hydrogen hubs also does not take into account the cost of powering electrolysis, operational costs, and capital expenditure, and makes unrealistic revenue projections.

• [37] Mr Bartlett failed to produce any discovery to substantiate the various hydrogen hubs that Global NRG claimed to be constructing and the basis for H2’s asserted intellectual property rights in the technologies. He could not provide the details of any staff or contractors involved in Global NRG group’s operations throughout the world, nor could he produce any financial records, evidence of bank transactions, or proof of physical or intangible assets.

• [38] The plaintiff took extensive steps to seek discovery and issue interrogatories. It did so, not because it still believed that there was such material, but because this would best substantiate the negative, that no such documents existed because the story was entirely fabricated by Mr Bartlett. I accept that this is the unavoidable conclusion based on the evidence that I have reviewed, given Mr Bartlett’s failure to provide any discovery supporting his representations. For a legitimate global business, it should have been straightforward to produce business records and/or witnesses to authenticate those matters (with appropriate confidentiality orders to protect any proprietary information).

• [39] During the discovery process, Mr Bartlett’s lawyers claimed (on his instructions) that he did not use a laptop when he travelled, hence no device to search and no documentation to produce. However, this is directly contradicted by contemporaneous correspondence in which Mr Bartlett referred to himself working on a laptop while travelling.

• [40] Mr Bartlett also asserted that Global NRG group lacked any financial records because it traded exclusively in Bitcoin. I agree with the plaintiff’s submission that it is inherently implausible for a group conducting operations of the magnitude represented not to have any bank accounts. Even if transactions occurred with payments made exclusively in Bitcoin, it is still mandatory to keep financial records.
• [41] Taking all of these matters into account, I accept that Mr Bartlett’s representations (as summarised at [33] above) were untrue, and I infer that Mr Bartlett knew this to be the case and pursued a deliberate strategy of seeking to deceive Hyzon, to induce investment.

Intention of reliance

• [42] It logically follows that Mr Bartlett intended that Hyzon would rely on the representations in making its decision whether to invest in H2. In other words, I accept the plaintiff’s submission that Mr Bartlett pursued a long-term scam to lure the investment payments by making the misrepresentations.

Causation of payments and contributory negligence

• [43] The evidence establishes to my satisfaction that Hyzon, via its principals Mr Knight and Mr Gu, relied upon the misrepresentations at the time Hyzon entered into the share subscription agreement and option agreement, as well as when it made the related payments at Mr Bartlett’s direction.

• [44] The contemporaneous correspondence (with Mr Bartlett, internal to Hyzon, and with third parties) demonstrates that Mr Knight and Mr Gu believed Mr Bartlett’s story. They thought his profile remained “under the radar” only due to Mr Bartlett’s privacy concerns and insistence on confidentiality.

• [45] With hindsight, Mr Knight and Mr Gu were overly trusting. As referred to in the contemporaneous material, this was in the context of a period affected by COVID-19 travel restrictions, which inhibited meeting in person and visiting facilities. Given the extensive groundwork for the scam laid by Mr Bartlett over a period of more than a year, Mr Knight and Mr Gu perceived the opportunity to invest in H2 as “an honour” and “very worthwhile bet” that they needed to secure quickly, otherwise the opportunity might be lost.
• [46] In any event, as Blanchard J said in Maruha Corporation v Amaltal Corporation Ltd, it is no excuse for someone guilty of fraud to say that the victim should have been more careful and should not have been deceived.¹³ This is because at common law, deceit (an intentional tort) does not give rise to a defence of contributory negligence.¹⁴

Quantum of loss

• [47] The calculation of direct loss for fraudulent misrepresentation normally requires the court to ascertain on the evidence the actual value of the assets purchased at the relevant date and to deduct that figure from the price paid.¹⁵

• [48] The quantum claimed in this case is based on a calculation of a value of zero for the H2 shares, deducted from the three payments that were made. Interest is then claimed on those amounts, which I deal with separately below.

• [49] The value of the payments made by Hyzon is set out in the following table (the payments were made and received in US dollars, so the exchange rate is provided merely for understanding the equivalent NZ dollar amounts involved):

• [50] The plaintiff has filed an affidavit of Mr Hayward from Calibre Partners as an expert in business valuation and corporate finance. He gave his expert opinion that the fair market value is zero for the shares and options in H2, based on certain factual assumptions. I am satisfied those assumptions are soundly based. In particular:

¹³ Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40, [2007] 3 NZLR 192 at [23].

¹⁴ Primeo Fund v Bank of Bermuda (Cayman) Ltd [2023] UKPC 40, [2024] AC 727 at [326] and [329]; Standard Chartered Bank v Pakistan National Shipping Corporation (No 2) [2002] UKHL 43, [2003] 1 AC 959 at [18].

¹⁵ Glossop Carton and Print Ltd v Contact (Print & Packaging) Ltd [2021] EWCA Civ 639, [2021] 1 WLR 4297 at [36].

¹⁶ Available at: Reserve Bank of New Zealand | Te Pūtea Matua “Exchange rates and Trade Weighted Index (B1)” <www.rbnz.govt.nz>.

(a) H2 has no alleged assets other than the value tied to its exclusive licence to use Global NRG’s intellectual property.

(b) Based on the factual findings I have made above, there is no evidence to substantiate that there is any such intellectual property, let alone that it has a significant commercial value.

(c) In any event, in answer to discovery questions the defendant asserted that, acting as a director of both companies and making the arrangements orally with himself, Global NRG granted H2 an exclusive licence “to use its WTE technology, experience and knowhow to produce electricity from waste at no cost, whilst [Mr Bartlett] remains a shareholder and director of [H2]”.¹⁷ In terms of those two conditions:

(i) Mr Bartlett has never been a shareholder of H2.

(ii) The rights would be extinguished upon him resigning as a director of H2.

I accept that no prospective shareholder would pay for such an ephemeral right.

• [51] Mr Hayward also identified various mistakes and inconsistencies in the forecast information provided by Mr Bartlett. Given my above findings about value, I do not need to examine those additional matters, other than noting that they further undermine Mr Bartlett’s credibility.

Statutory claims

• [52] Given that both the FTA and FMCA prohibit misleading conduct in specific contexts, it is convenient to deal with both statutes together to assess whether those provisions apply to the circumstances, and related questions of jurisdiction and relief.

¹⁷ Emphasis added.

Applicability to cross-border conduct

• [53] In Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd, the Court of Appeal assumed that a foreign court would not have jurisdiction to determine a claim under the FTA.¹⁸ The same would logically apply to the FMCA, so this Court clearly has subject matter jurisdiction for the statutory causes of action.

• [54] It is clear the two acts apply to conduct in New Zealand.¹⁹ Both the FTA and the FMCA also contain provisions about the applicability of those statutes to conduct outside New Zealand.

(a) The FTA applies to conduct outside New Zealand by any person resident or carrying on business in New Zealand, to the extent that such conduct relates to the supply of goods and services within New Zealand.²⁰

(b) Sections 19–23 of the FMCA apply to conduct outside New Zealand by any person resident or carrying on business in New Zealand, to the extent that the conduct relates to dealing in financial products that occurs (in part or otherwise) within New Zealand.²¹

• [55] As referred to above, Mr Bartlett was resident in New Zealand at the time the representations were made, and the conduct relates to the issue of shares, and share options, in respect of a New Zealand company. Subject to the other requirements addressed below, both Acts apply to the conduct, even if the representations were made at a time when Mr Bartlett was located overseas.

18. Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 at [141].

¹⁹ At [102]–[110].

²⁰ Fair Trading Act 1986, s 3.

²¹ Financial Markets Conduct Act 2013, s 33(1)(b).

Concurrent liability

• [56] Section 50 of the FTA preserves the right to take action under any other enactment or rule of law.²²

• [57] Section 507 of the FMCA expressly prevents a person from being ordered to pay a pecuniary penalty under the FMCA and be liable for a fine under the FMCA or FTA. Subject to that restriction, a defendant may be pursued under both the FTA and the FMCA for misleading conduct in connection with the sale of shares.

• [58] No fine or penalty is sought in this case, so no conflicts arise from pursuing both statutory claims together, along with a claim for deceit.

In trade

• [59] The Courts have taken a broad approach to interpreting the meaning of the words “in trade” for the purposes of the FTA.²³ It is well-established that liability for misleading conduct under s 9 can extend to a defendant who was not trading directly on his or her own account, but rather was acting as a director (or senior employee).²⁴ Liability of a director as principal of a company is commonly imposed where that director is the “alter ego” of the company and the only person authorised to act on its behalf.²⁵

• [60] I accept that Mr Bartlett was acting “in trade”. He was making these representations for commercial purposes and in his own interests. His representations extended well beyond merely acting as agent for H2 or any of the other corporate entities in the Global NRG group. In all relevant respects, he was also the alter ego for H2 and the Global NRG group, with no-one else authorised to act on behalf of those companies.

22. Ian Gault (ed) Gault on Commercial Law (online looseleaf ed, Thomson Reuters) at [FT50]−[FT50.01].

²³ Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 at [78].

²⁴ At [74], recently referenced in Bhargav v First Trust Ltd [2024] NZHC 1054 at [71].

²⁵ Bhargav v First Trust Ltd, above n 24, at [71].

Misleading conduct and causation

• [61] Different from the deceit cause of action, liability arises under the FTA and the FMCA for misleading conduct, whether or not the defendant intended to mislead.²⁶

• [62] In Red Eagle Corporation Ltd v Ellis, the Supreme Court said that in a relatively simple case where there is no doubt about what was said or its meaning and the loss arose from the same event, liability under the FTA can be established by a two stage inquiry.²⁷

(a) First, whether the conduct was misleading and deceptive for the purposes of s 9 of the FTA. This question is to be considered in context, including the characteristics of the person affected (for example, an unsophisticated consumer as opposed to a sophisticated businessperson). The question can be framed conveniently as whether a reasonable person in the plaintiff’s position would likely have been misled or deceived by the representation.

(b) Once a breach of s 9 has been proved, the inquiry moves to the requirements of s 43 — whether the loss or damage was sustained “by” the conduct of the defendant. This question engages a “common law practical or common-sense concept of causation”. It requires proof that the claimant was actually misled or deceived by the defendant’s conduct and then whether that conduct was the or an effective cause of the loss. It is possible for one of the effective causes of loss to be the claimant’s own conduct in failing to take reasonable care to look after their own interests, in which case the court can exercise its discretion as to whether the full amount of the loss should be recoverable.

²⁶ At [66].

²⁷ Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [27]–[31], applied in

Shabor Ltd v Graham [2021] NZCA 448, [2021] NZCCLR 26 at [26]–[27].

• [63] In this case, I have already found that Mr Bartlett was acting in trade when he misled Hyzon by making the misrepresentations, and this was designed to and did cause of the loss of Hyzon making investments in H2, which was a shell company with no value. That type of misleading conduct is at the core of what both the FTA and FMCA are designed to prevent, with the prohibition applying to conduct that relates to the supply of goods or services (FTA, s 3), and any dealing in financial products (FMCA, ss 19(1) and 22):

(a) For the FTA, “goods” is defined in s 2 to mean personal property of every kind (whether tangible or intangible). Shares and options to acquire shares so qualify.²⁸

(b) For the FMCA, the term “financial products” is defined to include an “equity security”.²⁹ An “equity security” in turn is defined as including a share in a company,³⁰ and an option to acquire a financial product of that kind.³¹

• [64] The power to award damages under the FTA must be exercised in a manner that does justice to the parties in the circumstances of the particular case and in accordance with the policy of the FTA.³² Liability for misleading conduct can arise even when a plaintiff was contributorily negligent, but the Court has the discretion to reflect those circumstances at the remedy stage (by applying reductions to reflect relative fault and contribution to loss).³³

• [65] There is no policy rationale for reducing the damages for contributory negligence as against a victim of fraud in favour of the fraudster. Hyzon was not at fault for causing the loss.

²⁸ Houghton v Saunders [2018] NZSC 74, [2019] 1 NZLR 1 at [318].

²⁹ Financial Markets Conduct Act, s 7(1)(b).

³⁰ Section 8(2)(a)(i).

³¹ Section 8(5)(iii).

³² Goldsbro v Walker [1993] 1 NZLR 394 (CA) at 403–404.

33. Roberts v Jules Consultancy Ltd (in liq) [2021] NZCA 303, (2021) 22 NZCPR 288 at [8] and [115]–[121].

Relief

• [66] The fundamental purpose of a remedy of compensatory damages is to put the person whose rights have been found to have been violated in the same position, so far as money can do so, as if those rights had been observed.³⁴ In general, expectation losses are not available because this would be to seek to enforce the wrong complained of, rather than assess the position if the misrepresentation had not been made.³⁵

• [67] The relief sought is appropriate within the above statutory frameworks,³⁶ seeking to restore Hyzon to the position it would have been in had the misleading conduct not occurred. But for the misrepresentations, Hyzon would not have made the payments to invest in H2.

Calculation of interest

• [68] At the hearing, the plaintiff sought leave to amend the statement of claim to specify the detail of the interest sought under the Interest on Money Claims Act 2016. I granted leave, so the amendments to the prayers for relief were as follows:

(a) subparas (a)–(c) of paras 53, 58 and 63 to read:

(a) damages (quantified in USD or NZD);

(b) interest calculated pursuant to sections 10 – 17 of the Interest on Money Claims Act 2016 on the sum in paragraph (a) for the period commencing on the date the respective payments were each made until the day on which the judgment debt (including all interest payable) is paid in full; and

(c) costs.

(b) subparas (b)–(d) of paras 69, 75 and 77 to read:

(b) compensatory damages under section 495 of the FMCA (quantified in USD or NZD);

³⁴ Joblin Insurance Brokers Ltd v M E Joblin Insurances Ltd [2001] 1 NZLR 753 (HC) at [15].

³⁵ Cox & Coxon Ltd v Leipst [1998] NZCA 202; [1999] 2 NZLR 15 (CA) at 26.

³⁶ Relief is granted under the Fair Trading Act, ss 43(3)(e) (refund) and (f) (damages); and the Financial Markets Conduct Act, s 486 (declaration of contravention), s 494 (when a court may made compensatory orders) and s 495 (terms of compensatory orders).

(c) interest calculated pursuant to sections 10 – 17 of the Interest on Money Claims Act 2016 on the sum in paragraph (b) for the period commencing on the date the respective payments were each made until the day on which the judgment debt (including all interest payable) is paid in full; and

(d) costs.

• [69] I accept that interest is appropriately payable pursuant to ss 9 and 10 of the Interest on Money Claims Act from the dates the payments were made until the judgment debt (including all interest payable under the Act) is paid in full.

• [70] I have made that calculation using the civil debt interest calculator up until the date of judgment (5 December 2024) as follows:

Result

• [71] For the above reasons, I find that the plaintiff has established an entitlement to relief under all three causes of action.

• [72] I declare that Mr Bartlett is liable in deceit for misrepresentations that induced the plaintiff’s investment in H2, and that his conduct:

(a) was misleading and deceptive in breach of ss 9 and 13 of the FTA; and

(b) was misleading or deceptive in breach of ss 19 and 22 of the FMCA.

• [73] I order:

(a) damages of USD 2,448,000 plus interest to the date of judgment of USD 338,846.96, making a total judgment debt of USD 2,786,847;

(b) interest pursuant to ss 9 and 10 of the Interest on Money Claims Act 2016 on the above sum until the judgment debt (including all interest payable under the Act) is paid in full; and

(c) costs and disbursements calculated on a 2B basis.

O’Gorman J