Acton Trustee Services Limited v Opera
[2014] NZHC 1882
•11 August 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-003540 [2014] NZHC 1882
BETWEEN ACTON TRUSTEE SERVICES
LIMITED Plaintiff
AND
RINO OPERA Defendant
AND
ANTHONY BYROM ACTON Third Party
Hearing: 11 August 2014 Appearances:
S J Tee for the Defendant/Applicant
P Dalkie for the Plaintiff/Respondent/Third PartyJudgment:
11 August 2014
ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
ACTON TRUSTEE SERVICES LIMITED v R OPERA AND A B ACTON [2014] NZHC 1882 [11 August
2014]
Background
[1] The defendant is being sued as a joint and several covenantor of a loan of
$325,000 made on 18 December 2002 to Marble Magic Limited (MML).
[2] The defendant was one of two directors of MML, the other being Mr Acton, the third party.
[3] On behalf of the Acton Trust, the plaintiff (ATSL) advanced the loan to
MML. Mr Acton is a trustee of the Acton Trust.
[4] Whilst the terms of the loan agreement described the defendant and Mr Acton as covenantors and therefore that they were to be treated as principal debtors, the specific terms of the loan agreement limited the defendant’s liability to that of a guarantor who was only liable to pay half of the principal sum, and therefore liability attached only in the event of default by MML.
[5] Bingo Magic Limited (now known as Bingo World Limited (BWL)) bought the assets of MML for $159,000. Mr Acton and the defendant were directors of BWL which thereafter operated essentially the same business as MML did.
[6] The terms of sale noted, by clause 17.1, that the purchase price would be satisfied by BWL taking over MML’s existing indebtedness to the Acton Trust for the value of the purchase price and that the purchaser would enter into new securities as were required by Acton Trust. By clause 18.1 the agreement noted it was entirely conditional upon the Acton Trust agreeing to release the business assets from its charges in consideration of BWL and Mr Acton and the defendant, taking a transfer of $125,000 of MML’s debt to the Acton Trust and entering into new securities and loan agreements for that amount.
[7] It seems clear on the face of this agreement that BWL was taking over
$159,000 of the debt due to ATSL.
[8] MML was placed into liquidation on 14 February 2008 and was struck off the
Register of Companies on 15 October 2010.
[9] The plaintiff’s claim is that the sum of $552,914.24 including interest representing half of the total debt is due for repayment by the defendant.
[10] The defendant pleads that MML did repay the principal sum together with interest and including a lump sum of $159,000 in November 2007. The defendant also pleads the doctrine of Laches, and a Limitation Act defence.
[11] The focus of the defendant’s discovery applicant is upon claims that the debt has been repaid.
[12] It is the defendant’s case that the loan has been repaid in full by virtue of payments made by MML until 2007 (when the company was liquidated by the plaintiff) and subsequently by payments made by BWL who accepted liability for the debt in the sum of $159,000 in consideration for the purchase of the business owned by MML. It appears to be ATSL’s case that nothing at all has been paid since the advance was made in 2002.
[13] Indeed Mr Acton deposes that the defendant was the day-to-day financial manager of the business. He said ATSL did not trade and therefore did not retain any records of account nor, it is inferred, did it pay tax for it had received no income.
[14] On the other hand clear evidence is provided by the defendant to show that from 2007 regular monthly sums of $4,000 were paid from the account of BWL to ATSL.
Application for particular discovery by the defendant
[15] A schedule attached to the application requests production by the plaintiff and
Mr Acton of:
(a) All bank statements of the plaintiff trust and Mr Acton from 18
December 2002 to the present date.
(b) Financial accounts of ATSL (for the trust) for the years 31 March
2003 – 31 March 2014.
(c) Financial accounts for BWL for the years 31 March 2008 – 31 March
2014, and bank statements for the period 1 November 2007 to present.
(d)The complete files of Dyer Whitechurch relating to the sale and purchase of the business of BWL between MML as vendor and BWL as purchaser, including files held on behalf of vendor, purchaser and guarantor, and all trust account ledgers relevant to the transaction.
(e) Copies of any guarantee or security agreement alleged to have been signed by the defendant in conjunction with the agreement for the sale and purchase of the business of MML in November 2007.
(f) Copies of any records or correspondence recording the satisfaction or release of any security provided by ATSL to MML, and all documents recording the release of Mr Acton from his guarantee provided to ATSL including details of any payments made.
[16] The defendant complains he has been unable to access the records of MML which would evidence the extent of repayments made between 2002 and 2007. The defendant considers bank statements and financial statements would establish the extent of any repayments made in that period.
[17] The defendant says Mr Acton is able to provide financial accounts and bank statements from the date of BWL’s incorporation to establish the extent of any repayments made by that company since.
[18] Earlier the Court has noted that in response the claims on behalf of ATSL that no loan repayments have been made, a copy of a bank statement of BWL discloses that regular monthly payments of $4,000 may have reduced ATSL’s debt from
$159,000 to about $26,000 – this notwithstanding the plaintiff has pleaded that no debt repayments at all had been made.
[19] As earlier noted herein the sale of the MML business to BWL in 2007 clearly contemplated the agreement was conditional upon ATSL agreeing to release the
existing securities of MML and that the guarantors (the defendant and Mr Acton)
would enter into a new loan agreement and security for $125,000.
[20] The defendant wishes access to the records of the solicitors who acted at that time. Further that if Mr Acton has made arrangements to satisfy any liability owed by him then, given the joint nature of the liability alleged, the defendant believes he is entitled to know the extent of those arrangements.
[21] Regarding the defendant’s claims of difficulties in obtaining documents in relation to MML’s liquidation Mr Dalkie submits there is actually no evidence of any steps taken to obtain those records which would now have been archived. Mr Dalkie submits the defendant is as able as anyone to obtain records from the liquidator.
[22] Mr Dalkie says that if since then there had been any debt repayment then only the defendant could have made this and the only evidence of this would be from the defendant himself.
[23] Mr Dalkie submits the purpose of the defendant’s applicant is nothing more than a fishing expedition. He believes the documents sought can only prove the negative of any claim that payment has been made.
[24] Mr Dalkie submits ATSL does not trade and therefore it has no accounts. Also BWL is not a party to the proceeding and the debt in issue has nothing to do with BWL.
[25] Mr Dalkie says the relevant parts of the solicitor’s files have been discovered as have any documents relating to guarantees or the security agreement alleged to have been signed by the defendant in conjunction with the sale of the MML business in November 2007.
[26] Regarding the defendant’s requests for records of correspondence recording the satisfaction or release of any security provided by ATSL to MML, or recording the release of Mr Acton from his guarantee, Mr Dalkie says there are none and nor has the defendant provided any evidence such documents exist. Mr Dalkie says
ATSL could only have released MML from its obligation to pay prior to liquidation. Mr Dalkie submits that even if Mr Acton was released by the plaintiff, which he says he was not, it would be irrelevant to this proceeding.
[27] Mr Dalkie submits the purpose of the defendant’s search for records is based
on hope rather than reasonable expectation that such records exist.
Considerations and conclusions
[28] In this case Mr Acton by his trust has advanced funds to MML which was jointly and severally guaranteed by Mr Acton and the defendant. The business of MML failed. On the application of Mr Acton’s trust (through ATSL) MML was placed into liquidation.
[29] Another company of which Mr Acton was the principal shareholder (BWL)
acquired the assets of MML and pursued the same business objectives of MML from
2007.
[30] This proceeding was filed on 24 June 2013 i.e. nearly six years after MML
was liquidated.
[31] The purchase of the assets of MML by BWL contemplated, indeed was conditional upon a rearrangement of that loan that had been guaranteed by the defendant and Mr Acton; that the existing securities of MML and the guarantors would be released and new arrangements made. Clearly the solicitor’s records will be able to clarify the position; and should confirm or otherwise the release of the defendant from any alleged liability, or which show any reduction in the quantum of any liability claimed.
[32] The defendant has requested the documents the subject of his application, since the plaintiff ’s proceeding was filed. Little has been provided by response. ATSL says it has provided all it should. Claims for production of BWL records are resisted because BWL is not a party to the proceeding. It is claimed the defendant is able to obtain records from the liquidators.
[33] The defendant believes that if there are documents which are not necessarily in the physical possession at the present time of the plaintiff or Mr Acton, they are nonetheless within their control e.g. company bank statements and accounts by or from accountants and solicitors.
[34] In this proceeding the plaintiff has the responsibility to establish default of the defendant’s obligations to make payment. The starting point is that the plaintiff is capable of proving that default. Here the defendant's pleading is that there has been no default, and/or that the loan has been repaid, or that a variation of the loan arrangements made in 2007 release any liability.
[35] In this case the Court agrees that the documents identified in question are reasonably able to be produced and are important and relevant to the claim and its quantum.
[36] It is not clear from the affidavit on behalf of the plaintiff filed in opposition just what difficulties there may be in providing the documentation sought. Mr Dalkie strongly resists claims of any responsibility for the production of records on behalf of BWL. With respect, the Court disagrees with Mr Dalkie’s reasons for adopting that position i.e. because BWL is not a party to the proceeding. Although that is so that is not determinative of Mr Acton’s discovery obligation. BWL’s documents are directly relevant in that they may assist in identifying the measure of debt if any is remaining to be paid to ATSL. Also those documents are within Mr Acton’s control and he clearly has the ability to compel their production.
[37] A Court can by reference to 8.19 require the discovery of additional documents if the Court considers those ought to have been discovered in any event; that if there were indeed such documents but that they no longer exist then an appropriate affidavit should provide the details.
[38] Mr Acton is a central figure in the actions of the plaintiff by its loan to MML; as a joint and several guarantor of that loan; by the decision to appoint liquidators to MML; in the sale of the assets of MML to BWL; and in the decision to advance funds to BWL to facilitate its purchase. It is reasonable to expect there were funding
arrangements involved with BWL’s purchase. It was nearly six years later proceedings were filed based on the guarantee the defendant provided about 12 years ago to fund the purchase of a business by a company which went into liquidation six years ago.
[39] It appears to be the plaintiff’s case that there are discovery obligations which are limited to matters which they must prove. That is not correct if there is available for production also documents which are adverse to their case and that includes documents which may be relevant to any defence pleaded.
Result
[40] The application is granted in terms sought by the Schedule attached.
[41] ATSL and/or Mr Acton are to file and serve a further affidavit of documents within 21 days i.e. by 1 September 2014, and shall by that date provide all further identified documents for inspection.
[42] The respondents shall jointly and severally be liable to pay 2B costs and disbursements.
Associate Judge Christiansen
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