ASB Bank Ltd v Rushton HC Whangarei CIV 2010-488-397

[2010] NZHC 1802

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2010-488-000397

UNDER  Part 12 of the High Court Rules

IN THE MATTER OF     an application for summary judgment

BETWEEN  ASB BANK LTD Plaintiff

ANDARTHUR GERALD RUSHTON First Defendant

ANDCOLLEEN COLETTE RUSHTON Second Defendant

Hearing:         18 August 2010

Appearances: J Collins for Plaintiff

J Browne for Defendant

Judgment:      18 August 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors/Counsel:

Simpson Grierson, Private Bag 92518, Auckland

Ellis Law, PO Box 4516, Auckland

ASB BANK LTD V A G RUSHTON AND ANOR HC WHA CIV-2010-488-000397  18 August 2010

[1]      This is an application for summary judgment by ASB Bank Ltd.  It claims the sum of $200,000, plus interest and costs, which it says is due to it under a partial settlement for the defendants and their business entities, their company, to reduce their indebtedness to the Bank.

[2]      Mr and Mrs Rushton have a company called ROAC Ltd, which has since been re-named Te Awatea Ltd.  They are the directors of that company and they are shareholders through trusts in that company as well.     The ASB Bank provided banking accommodation for the business and also took security.  The security was taken over the farms owned by ROAC Ltd, over the Rushtons’ residential property at

11 Patiki Street, Whangarei, and over livestock.  There were a variety of revolving credit facilities.  The Rushtons personally guaranteed repayment of the indebtedness to the Bank.

[3]      On 17 March 2009, the Bank made demand under one of the facilities for about $1,095,000.  It then issued notices under ss 119 and 121 of the Property Law Act to enforce the securities and then appointed receivers.

[4]      On 8 September 2009, it received payment of $500,000 and on that payment it released the securities over Patiki Street.  The guarantees remained in place.

[5]      The remaining indebtedness of the Rushtons and the company to the Bank was in the order of about $3.2 million.

[6]      On 22 October last year, the Rushtons’ lawyer, Mr Brian Ellis, wrote to the

Bank with a proposal for clearing out the Rushtons’ indebtedness to the Bank.

[7]      On 5 November, Mr Ellis wrote again with a modified proposal.  In essence, that modified proposal was accepted by the Bank.  The proposal was for payment of

$2.5 million to settle the Rushtons and their companies’ indebtedness to the ASB Bank.  That payment was to be by way of a payment of $1.7 million, for which the Rushtons and their companies would seek financing and in addition $800,000 would be paid by way of stock sales.  This is recorded in paragraph 5 of Mr Ellis’s letter of

5 November 2009.  He said at 5.1:

Subject to the Bank’s acceptance of the restructuring and exit proposal, the following steps will need to be taken:

(a)the receivers of the company retire so that the company comes out of receivership;

(b)the company’s farm property at Wai o Te Kumerau, Waimatenui, Kaikohe, be sold to Chantorus Ltd, together with the plant and equipment  as  well  as  the  stock;  being  retained  for  the  ongoing farming operation, including the stock as set out in paragraph 4.1;

(c)       the loan moneys of $1.7 million be paid to the ASB Bank;  and

(d)the company retains ownership of the stock set out in the schedule handed to you and that:

(i)stock to the value of $417,300 be sold and that sum to be paid to you on or before 30 November 2009;

(ii)      the remainder of the stock as set out in the schedule and up to the value of a total figure of $800,000 (in aggregate) be paid to you by 31 January 2010.

[8]	Paragraph 6.1 went on to say:
Our clients acknowledge that the personal covenants of Mr and Mrs Rushton will remain in place until such time as the Bank receives a net $2.5 m.
[9]	As  it  happened,  the  refinancing  arrangements  by  the  Rushtons	went

somewhat awry.  They were able to raise finance of $1.5 million and that was paid at the end of December, but the Rushtons were unsuccessful in trying to arrange the final $200,000.  The Bank, through its solicitors, accepted a partial settlement which entailed the Bank accepting payment of $1.5 million and accepting that a further payment would need to be made on or before 18 January 2010.  The amount of the further payment was $200,000.

[10]     18  January  2010  came  along  but  the  payment  of  $200,000  was  not forthcoming.   In the meantime, the new farming company, Chantorus, had been incorporated and there had been transfers of stock from the ROAC company, now re- named Te Awatea Ltd, into Chantorus Ltd.  The Bank now sues for the $200,000.

[11]     The response from the Rushtons is to point to other payments that have been made comprising stock sales and to say that some of those stock sales come from

Chantorus Ltd instead of Te Awatea Ltd and  to say that those payments go in reduction of their indebtedness under the $200,000.

[12]     It is clear from Mr Ellis’s letter of 5 November 2009 that the $200,000 was to be raised independently of stock sales.  That is because the letter contemplates loan moneys being raised to pay the $1.7 million.   Stock sales were to go towards the payment of the $800,000 to make up the total of $2.5 million.  In my view, it is not a sufficient answer for the Rushtons to rely on stock sales by Chantorus Ltd and to say that the proceeds of sale of stock out of Chantorus  Ltd  go in reduction of the

$200,000.   They can only go in reduction of the $800,000 for stock sales under

5.1(d) of Mr Ellis’s letter.  I do not accept the Rushtons’ claim that payments since made to the ASB from stock proceeds can be used in reduction of the $200,000 which  was  not  paid  at  the  end  of  December  2009.    The  matters  raised  by the Rushtons, in my judgment, do not give them a defence against the claim for payment of the $200,000 left unpaid in December 2009.   The Bank is entitled to recover judgment for that sum of $200,000.

[13]     In its statement of claim, the Bank had somewhat over-optimistically claimed interest at 22%.  I see nothing in the correspondence that gives the Bank any right to claim interest at that rate.  In the hearing before me, it modified this position and is claiming interest at 8.4%.  Under the Judicature Act 1908, that is an appropriate rate in this case and interest is awarded from 18 January 2010 until 18 August 2010 in the  sum  of  $9,711.78.    The  plaintiffs  will  also  recover  costs  of  $7,520  and

disbursements of $1,246.88.  That makes a total judgment sum of $218,478.66.

R M Bell

Associate Judge