NZMB wins $2M Emslie claim

Press, 13 June 1984, Page 30

NZMB wins $2M Emslie claim

PA Dunedin New Zealand Motor Bodies, Ltd, (NZxMB), has won its ?2 million claim against the former shareholders of Emslie Consolidated Industries, Ltd. Emslie is a Dunedin motorbody and general engineering company taken over by NZMB in 1980.

But in finding for the plaintiffs, NZMB and Emslie Consolidated, Mr Justice Barker ordered an inquiry over damages to be awarded. He did this because there was an absence of strict proof of the amount of damage by the plaintiffs, and there was also a lack of consent by the defendants at the' hearing he said.

The plaintiffs claimed a total of just over $2 million from the former Emslie shareholders. This sum included $691,895 for the refund of the purchase price of the shares, including cancellation of the mortgage of shares; $649,673 for losses incurred by Emslie Consolidated from July 1 to July 30, 1980; $735,000 for extraordinary losses including redundancy and “closing down” expenses as well as interest.

The plaintiffs also sought a declaration that they were no longer bound by the lease entered into for the Dunedin premises owned by the defendants.

The hearing of the claim in the Dunedin High Court in February lasted 10 days. When it ended, Mr Justice Barker told counsel that because of the volume of documentation — including 306 pages of typed evidence — and the complexity'of the case, he would be some time in deciding the matter.

His reserved decision ran to 85 foolscap pages. NZMB contended that it wanted to buy Emslie Consoliated as a means to rationalising the bus and coach building industry, but in going ahead with the merger by buying the Emslie stockholding, the plaintiffs said they depended on budget forecasts presented by the defendants. Had they known that these forecasts of profitability were so inaccurate, they would not have continued with the merger, the plaintiffs said.

Although the defendants had no legal obligation to reveal to NZMB that they were falling behind in meeting payments, and that there had already been a suggestion of “mothballing” the coach building factory, Mr Justice Barker said he felt the defendants were eager to achieve a sale of what was clearly an ailing business. He considered that there was a legal basis for a possible award of damages, and he found that the plaintiffs were entitled to succeed in their claim for damages under the Contractual Remedies Act 1969, section 6. Mr Justice Barker ruled that the plaintiffs could recover damages in respect of the normal loss flowing from the breach by defendants of the act, based on diminuition in the value of the Emslie Consolidated shares.

They could also recover in respect of the consequential losses — that is, Emslie Consolidated’s trading and operating losses and the closing-down expenses.

These claims could be viewed as a mitigation loss, he said. He ruled that the defendant’s counterclaim for back rent for the factory premises must fail, and that the claim by the plaintiffs for a declaration that the lease was surrendered must succeed. He said he would need to hear further submissions on whether any rent was still owed.