David v TFAC Limited

[2009] NZCA 354

IN THE COURT OF APPEAL OF NEW ZEALAND

CA26/2008
[2009] NZCA 354

BETWEENSUSAN ELIZABETH DAVID

First Appellant

ANDUAR LIMITED

Second Appellant

ANDTFAC LIMITED

First Respondent

ANDGEOFFREY ALAN GRISDALE AND AMANDA MARY GRISDALE

Second Respondents

Court:Arnold, Potter and Harrison JJ

Counsel:C Walker for First and Second Appellants

D Connor For First and Second Respondents

Judgment:13 August 2009 at  4 pm 

JUDGMENT OF THE COURT

The second appellant is entitled to judgment against the first and second respondents on its counter-claims against them.  In case the parties are unable to agree the form of the order(s), we reserve leave to apply.

REASONS OF THE COURT

(Given by Arnold J)

[1] In our earlier judgment on this appeal ([2009] NZCA 440) we left open the question of the counterclaims brought by the second appellant, UAR Limited (UAR), against the first and second respondents, TFAC Limited (TFAC) and Mr and Mrs Grisdale (the Grisdales) (at [68] – [73]). In those claims UAR sought payment of various amounts under TFAC’s regional master franchise (RMF) agreement and of costs. UAR’s claim against TFAC relied on TFAC’s wrongful repudiation of the RMF agreement and its claim against the Grisdales was made under their guarantee.

[2]       Mr Connor for TFAC and the Grisdales had offered no submissions on this aspect of the case.  Although we accepted that, in principle, UAR was entitled to judgment on its counter-claims, we raised the question whether there was an obligation to mitigate and called for further submissions. 

[3]       The parties have provided their further submissions.  Mr Walker accepted that UAR could only recover in respect of such loss as it could not have avoided by taking reasonable steps.  However, he raised two points, one substantive and one procedural, which he submitted meant that the principle of mitigation had no application in the present case. 

[4]       The substantive reason was that the supply of regional franchise areas exceeded the demand for regional franchises.  He said that there was no basis to say that UAR would have sold all available franchises within the ten-year term of the TFAC’s RMF agreement.  Accordingly, that agreement would have run its course, and all the payments due under it would have been payable.  The procedural reason was that the onus was on the respondents to raise and prove a failure to mitigate.  They did not plead such a failure nor did they offer any relevant evidence.  Accordingly, there was no proper basis for this Court to deal with the point, or to remit it to the High Court for resolution.

[5]       For his part, Mr Connor advised that the respondents had made an informed and fully advised decision not to raise the issue of mitigation at trial or on appeal.  He nevertheless went on to make some brief submissions, among them the submission that the minimum fees which TFAC was obliged to pay under the RMF agreement were penal in nature and therefore unenforceable, relying on General Finance Acceptance Ltd v Melrose [1988] 1 NZLR 465 (HC).

[6]       Given that the respondents made a deliberate and fully advised decision not to raise and argue a failure to mitigate, we accept Mr Walker’s submission that it is inappropriate for us to address the matter or to refer it back to the High Court for further factual findings.  Accordingly, we consider that we have no alternative but to enter judgment for UAR on its counter-claims.

[7]       We are not able to identify the precise amount of those claims.  If the parties are unable to reach agreement on the form of the order(s), there is leave to apply. 

Solicitors:

Gilbert Walker, Auckland for Appellants
Jones Law, Auckland for Respondents