Published 01 June 2022
Sale of business — default on loan — summary judgment — jurisdiction of court — breach of warranty/misrepresentation Contracts & Commercial Law Act 2017, ss 35 & 37 — Fair Trading Act 1986 — Archers Road Trust Company Ltd v JMR Business Ltd [2016] NZHC 2987 — Obenyd Ltd v Lawrence [2019] NZHC 46 — Preyer Construction Wellington Ltd v Elizabeth Mary Cathie [2019] NZHC 2881 — Waterfront Properties (2009) Ltd v Lighter Quay Residents’ Society Incorporated & Ors [2015] NZCA 62 — Grant v NZMC [1999] 1 NZLR 8 (CA) — Brown’s Real Estate v Grand Lakes Properties Limited [2010] NZCA 425 — Harcourts Group Limited v Grewal [2018] NZHC 2983. The parties had entered an agreement for sale and purchase of a business, with an accompanying loan agreement under which the plaintiff vendor would provide vendor finance. Subsequently the defendant purchaser stopped making the monthly payments stipulated by the agreement, claiming that during negotiations the plaintiff had failed to disclose that one of the business's customers was ending its trading relationship with the business. When the dispute made its way to court the defendant applied for the proceedings to be struck out. The defendant argued that the Court lacked jurisdiction to hear the matter, because a clause in the parties' sale and purchase agreement stated that the parties would refer any dispute to an expert for a final and binding decision. The plaintiff argued that the defendant was alleging breach of warranty and misrepresentation, and that the dispute resolution clause did not apply to claims of this kind. The Court found that this type of dispute was too complicated to be adequately resolved by the dispute resolution clause. For instance, the wording of the clause did not allow sufficient time for the dispute to be resolved. Therefore, it would not be appropriate to refer the dispute to an expert for resolution. The clause did not apply to the loan agreement between the parties either, because the loan agreement stood on its own terms and contained more detail about the terms of the loan and payments due under it. The Court concluded that it did have jurisdiction over the dispute, and the defendants' application failed. The Court ordered costs on a 2B scale to the plaintiff. Judgment Date: 4 August 2020.
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