ASB Bank Ltd v Sgargetta
[2017] NZHC 3097
•13 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-788 [2017] NZHC 3097
BETWEEN ASB BANK LIMITED
Applicant
AND
ELLIOT DANIEL SGARGETTA Respondent
Hearing: 4 September 2017 Appearances:
A E Simkiss and JJK Spring
Respondent in personJudgment:
13 December 2017
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 13 December 2017 at 3:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Parties:
Ms A E Simkiss and Mr JJK Spring, Minter Ellison Rudd Watts, Solicitors, Auckland
Mr E D Sgargetta
ASB BANK LTD v SGARGETTA [2017] NZHC 3097 [13 December 2017]
[1] The plaintiff, ASB Bank Ltd (ASB), seeks summary judgment against the defendant, Mr Sgargetta, in reliance on an unlimited deed of guarantee and indemnity in respect of loans made by ASB to Sleep Overs Ltd (in receivership and liquidation) (Sleep Overs). The claim is for $598,340.15, together with interest.
[2] Mr Sgargetta opposes the application for summary judgment and also seeks discovery.
Procedural issues
[3] Mr Sgargetta has acted on his own behalf. The documents originally filed by Mr Sgargetta did not comply with the High Court Rules and, as noted by Edwards J in a minute for the first case management conference, were unintelligible.1 There were directions that Mr Sgargetta file and serve documents which comply with the High Court Rules, by 3 July 2017. That did not happen. Although Mr Sgargetta’s response to his default was unsatisfactory, the time was extended to 21 July 2017.2
Further difficulties arising out of Mr Sgargetta’s responses were noted in successive minutes. It is unnecessary to record any aspects of those further minutes, save to note that in the penultimate minute, of 17 August 2017, Wylie J noted that Mr Sgargetta had filed a further memorandum which was “an abuse of process and vexatious”.3
[4] On 28 August 2017, Mr Sgargetta sent to the court, by email, a fresh set of documents in opposition and, as with the earlier documents, a counterclaim. As well as being over a month beyond the extended date for filing, these documents were not properly filed and again did not comply with the High Court Rules. These are the documents which Mr Sgargetta sought to rely on at the hearing.
[5] At the commencement of the hearing Ms Simkiss, counsel for ASB, submitted that the Court should refuse to accept the documents for filing because
there were deficiencies in them which were “gross and palpable and … incapable of
1 ASB Bank Ltd v Sgargetta HC Auckland CIV-2017-404-788, 7 June 2017 (minute of Edwards J).
2 ASB Bank Ltd v Sgargetta HC Auckland CIV-2017-404-788, 10 July 2017 (minute of Venning J).
3 ASB Bank Ltd v Sgargetta HC Auckland CIV-2017-404-788, 17 August 2017 minute of Wylie J).
leading to legal consequences”.4 In addition to the deficiencies in the documents, Ms Simkiss referred to earlier minutes directing Mr Sgargetta to pay applicable filing fees or obtain fee waivers.
[6] I concluded that the hearing should proceed and that Mr Sgargetta could rely on the documents that had been received on 28 August, with these to be treated as having been filed. The reasons for that conclusion, and the basis upon which I am proceeding in relation to Mr Sgargetta’s documents, are as follows:
(a) The documents still do not comply with the Rules, and some are not easy to follow, but Mr Sgargetta’s essential contentions, and the evidence he seeks to rely on, are clear enough.
(b)To the extent that there are deficiencies in the documents filed, or in the written and oral submissions that were subsequently made by Mr Sgargetta, and if those deficiencies are not capable of being rectified by the Court in a way which is fair to both parties, then Mr Sgargetta has to bear the consequences of those deficiencies.
(c) Although filing fees for the new documents were not paid, I accepted Mr Sgargetta’s submission that advice he had received from the Court Registry may have been ambiguous, leaving him under the impression that no further fees were required to be paid following waiver of a fee on one earlier document.
(d)I did not consider that there would be any material prejudice to ASB in permitting Mr Sgargetta to rely on the documents. ASB’s solicitors and counsel had, notwithstanding the preliminary objection, analysed the further documents and prepared for the hearing on the basis that there would be need to address Mr Sgargetta’s arguments to the extent that the arguments could reasonably be discerned from the documents. In that context I also note that Ms Simkiss produced at the hearing a
folder containing copies of documents referred to in an affidavit from
4 Haden v Wells [2012] NZHC 31 at [7].
Mr Sgargetta as annexures to his affidavit, but which were difficult to identify and use. The folder produced by Ms Simkiss was indexed and tabbed in a way which made reference to documents relied on by Mr Sgargetta a lot easier than it would have been.
[7] Having regard to those considerations I concluded that Mr Sgargetta should be given a full opportunity to present his case in reliance on the documents sent to the Court on 28 August, together with the written submissions presented at the hearing. I have not had regard to any of the documents that were earlier tendered for filing and which had already been rejected by the Court, as recorded in the earlier minutes.
[8] Given the very clear directions to Mr Sgargetta in earlier minutes this is a substantial dispensation in his favour.
Factual background
[9] At all material times Mr Sgargetta was a director of Sleep Overs and two associated companies, Evergreen Lodge Ltd (Evergreen) and Remarkables Lodge Ltd (Remarkables). Evergreen and Remarkables are also in receivership and liquidation. The companies Evergreen and Remarkables are to be distinguished from two properties, originally purchased by Sleep Overs, known as Evergreen Lodge and Remarkables Lodge, referred to in the next paragraph.
[10] In 2014 ASB entered into three facility agreements as follows:
(a) An agreement was made on 21 February 2014 by which ASB made a commercial loan of $1,641,250 to Sleep Overs as the borrower, with Evergreen and Mr Sgargetta as guarantors. This loan was to refinance loans secured by first and second mortgages over the property then owned by Sleep Overs and known as Evergreen Lodge. The loan was for a term of 15 years (the Evergreen loan).
(b)An agreement was made on 17 October 2014 by which ASB made a commercial loan of $1,761,375 to Sleep Overs as the borrower, with
Evergreen, Mr Sgargetta, and Remarkables as guarantors. This loan was to refinance loans secured by first and second mortgages over the property then owned by Sleep Overs and known as Remarkables Lodge. This loan was for a term of five years (the Remarkables loan).
(c) On 6 June 2014 ASB granted an overdraft facility of $50,000 to Evergreen as borrower with Mr Sgargetta and Sleep Overs as guarantors.
[11] The three facilities were drawn down in full.
[12] The loans were secured by, amongst other securities, registered mortgages over Evergreen Lodge and Remarkables Lodge.
[13] In addition, by deed dated 17 October 2014, Mr Sgargetta, Sleep Overs, Evergreen and Remarkables gave unlimited cross-guarantees and indemnities to ASB, with each party guaranteeing to ASB the due and punctual performance of all payment and performance obligations of each of them to ASB.
[14] ASB contends that from April or May 2015 there were defaults under the facility agreements. In August 2015 notice of the defaults were given to Mr Sgargetta, as guarantor, and to the other parties with liability.
[15] On 8 September Sleep Overs appointed a real estate agent to market Evergreen Lodge and Remarkables Lodge. Sleep Overs was not able to achieve a sale.
[16] On 21 September 2015 ASB served default notices under the Property Law Act 2007 on Mr Sgargetta and other necessary parties. The Property Law Act notices expired unremedied. ASB obtained marketing appraisals and instructed a real estate agent to market and sell the secured properties.
[17] On 4 February 2016 ASB, pursuant to its rights under the securities, appointed receivers of Sleep Overs, Evergreen and Remarkables.
[18] Further Property Law Act notices were served by the receivers, including on Mr Sgargetta. These were unremedied when they expired on 18 March 2016. On or about 22 April 2016 the receivers sold the secured properties. The net proceeds paid to ASB were some $3.34 million. The shortfall to ASB, at 15 June 2016, was
$590,934.13.
[19] Sleep Overs, Evergreen and Remarkables were put into liquidation by the
High Court on the application of the receivers on 15 September 2016.
[20] On 19 October 2016 ASB made demand in writing on Mr Sgargetta, as a guarantor, for payment of the balance outstanding, together with all accrued interest. No payment was made.
[21] ASB now claims $598,340.15 as the balance outstanding at 11 April 2017, together with interest at the contractual rate.
Mr Sgargetta’s opposition
[22] Mr Sgargetta’s grounds of opposition are expressed in a variety of ways. Allowing for a degree of overlap, or different expressions used which in substance cover the same proposition, there are six grounds of opposition to the summary judgment application. In the order in which I intend to deal with them, the first four amount to counterclaims for damages. The fifth and the sixth grounds of opposition can separately be identified as what amount to potential defences to ASB’s claim. They are potential defences because, in reliance on these grounds, Mr Sgargetta contends that the facility agreements are void and, in consequence, he can have no liability under the guarantees. These grounds are summarised in the following paragraphs.
Ground 1: breach of the loan agreements by ASB
[23] Mr Sgargetta contends, in effect, that it was a term of the Evergreen loan, and of the Remarkables loan, that ASB would facilitate syndication of the properties by Sleep Overs. Syndication, in simplest terms, involved sales to investors of partial interests in Evergreen Lodge or Remarkables Lodge. Mr Sgargetta said that, to
enable syndication, ASB’s co-operation was required to secure partial release of the mortgage over whichever property an investor was going to take a partial interest in. Mr Sgargetta alleges that, when Sleep Overs was seeking to proceed with syndication, ASB breached its contractual obligation by failing to facilitate syndication and then by obstructing syndication and taking other steps which prevented Sleep Overs from selling partial interests which would have enabled the loans to be repaid in part.
Ground 2: reckless, negligent or unconscionable acts of ASB
[24] There is a claim for damages arising out of direct steps taken by ASB to market and sell Evergreen Lodge and Remarkables Lodge, before the receivers were appointed. Mr Sgargetta contends that these steps were reckless, negligent or unconscionable and adversely affected the value of the properties.
Ground 3: wrongful appointment of receivers
[25] The allegation is that ASB “without notice appointed KPMG (as receivers) to ambush and take possession of the venues and control the businesses”. The legal nature of the claim is not clear, but it seems that Mr Sgargetta contends that ASB was not entitled to appoint receivers.
Ground 4: sale at an undervalue and other acts of the receivers
[26] Mr Sgargetta contends that ASB is liable for the sale of Evergreen Lodge and Remarkables Lodge at prices which were 30 per cent below valuations provided to ASB for the purpose of the loan agreements and 47 per cent below market value in April 2016 when the properties were sold following receivership. There are further claims against ASB in respect of acts or omissions of the receivers, including a contention that there were excessive costs incurred in selling the properties. These matters are said to give rise to losses recoverable from ASB.
[27] In respect of all claims for damages, pursuant to these four grounds, there is a further allegation, although not a distinct ground, as follows:
[ASB] by counter-claim is liable for instructing receivers (KPMG) to ambush these operating businesses, without prior notice, causing distress and anxiety to family, friends and staff, and thus decimating/devaluating all goodwill and value in the businesses’ brand, sales and relationships.
[28] The relief sought in reliance on grounds 1 to 4 is judgment against ASB for damages in a sum of $3,400,970.11, “plus consequential damages as a result of business closures, reputation, health and family destruction and equity”.
Ground 5: loan agreements void for breach of the Fair Trading Act 1986
[29] Mr Sgargetta contends: ASB acted in breach of ss 9, 10, 11 and 13 of the Fair Trading Act 1986; in consequence the loan agreements are void; and in further consequence he can have no liability under the guarantee. The primary claim is breach of s 13 – that there were false or misleading representations by ASB to the effect that ASB would facilitate syndication by Sleep Overs of the Evergreen Lodge and Remarkables Lodge properties. Sections 9, 10 and 11 are directed to misleading and deceptive conduct. Mr Sgargetta’s arguments do not suggest that there was any misleading or deceptive conduct on the part of ASB which is in any material way different from the allegation of false or misleading representations in relation to syndication.
[30] Section 43(3) of the Fair Trading Act prescribes orders a court may make if breach of the Act is established. These include an order declaring all or part of a contract to be void.
Ground 6: agreements void for “inducement and unconscionability”
[31] This particular ground is contained in a general contention that ASB’s “loan agreement/s are void for misrepresentation, misleading, inducement and unconscionability, therefore so to [sic] the guarantee”.
[32] It appears that the allegations of “inducement and unconscionability” are part of the general contention in reliance on the Fair Trading Act. In case that is not correct, I will address these two elements as separate grounds of opposition and in support of a contention that the loan agreements and the guarantees are void.
Summary judgment principles
[33] A plaintiff’s application for summary judgment is made under r 12.2(1) of the
High Court Rules. The well settled principles may be summarised as follows:5
(a) The question on summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried.6
(b)The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.7
(c) The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or as inherently improbable.8
(d)In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.9
(e) Where the only arguable defence is a question of law which is clear-cut and does not require findings on disputed facts, or the ascertainment of further facts, the Court should normally decide it on
the application for summary judgment, just as it will do so on an
5 This summary is taken, in large part, from a summary in Krukziener v Hanover Finance Ltd
[2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
6 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
7 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
8 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
9 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence.10
(f) A counterclaim is not a defence.11
Evaluation
[34] The evidence for ASB establishes that Mr Sgargetta has prima facie liability. Mr Sgargetta seeks to have the loan agreements declared void but, for reasons I will come to, the grounds of opposition seeking this relief do not involve a challenge to the validity of the guarantees and facility agreements as contractually enforceable documents when they were entered into. In fact, Mr Sgargetta’s primary grounds of opposition are claims for damages for breach of contract. In other words, for his primary claims he relies on what he contends are terms of the contracts ASB relies on.
[35] The position in relation to the sum claimed by ASB is the same. The claim is for judgment in a sum of $598,340.15, stated to be the total indebtedness at 11 April
2017. The evidence for ASB which establishes that sum has not been challenged. There is a further claim for interest on that sum, at the contractual rate of 22.5% per annum, from 9 September 2016. An issue arises in that regard, which I will note at the end of this judgment.
[36] Given the prima facie case made out on ASB’s claim, it is necessary to consider Mr Sgargetta’s grounds of opposition, but bearing in mind that the ultimate onus is on ASB to satisfy the Court that Mr Sgargetta has no defence. It is appropriate to consider Mr Sgargetta’s counterclaims – opposition grounds 1 to 4 – separately from grounds 5 and 6 involving the contentions that the loan agreements are void.
Opposition grounds 1 to 4: counterclaims
[37] These four grounds cannot succeed. This is because they are counterclaims.
10 Pemberton v Chappell, above n 6, at 4.
11 A proposition of general law. In respect of summary judgment applications see Pemberton v
Chappell, above n 6, at 5.
[38] Mr Sgargetta expressly advanced these grounds of opposition as counterclaims. In terms of his argument, that is an end to these grounds as a basis for refusing ASB’s application for summary judgment.
[39] It might be argued that some of these grounds of opposition amount to claims by way of set-off, rather than counterclaims. As such, they might amount to defences.12 Assuming, without determining, that some grounds of opposition do amount to set-off, in this case it would not assist Mr Sgargetta. This is because of a provision in the guarantees which precludes a claim of set-off, and a counterclaim, in response to the creditor’s claim. The provision is as follows:
Payments to be Free and Clear: Each payment by you to us is to be unconditional and is to be in full, without any deduction or withholding whatsoever (whether in respect of set-off, counterclaim, charges or otherwise) unless such deduction or withholding is required by law. If any deduction or withholding is required by law, you will pay to us an additional amount so that the net amount actually received and retained by us on the due date (free from any liability in respect of any deduction or withholding, and ignoring any amount which we are deemed to have received by reason of any legislation) equals the full amount which we would have received had no deduction, withholding or payment been made or required.
[40] The qualification in the second sentence, relating to deductions required by law, has no application. This clause does not prevent Mr Sgargetta bringing claims against ASB which he is presently seeking to advance by way of counterclaim, or possibly set-off, but it does mean that grounds 1 to 4 are not grounds to refuse summary judgment for the sum sought by ASB.
[41] There are some further difficulties for Mr Sgargetta in his reliance on grounds
1 to 4 in opposition to ASB’s claim. Given the conclusions already recorded it is not strictly necessary to refer to these further difficulties, but I will note them briefly. The comments in the next three paragraphs, are also of relevance to ground 5.
[42] Mr Sgargetta has not provided an evidential foundation for the contention that it was a term of the facility agreements and related securities that ASB would facilitate syndication. If ASB had the obligations that Mr Sgargetta contends it had,
this necessarily meant that Sleep Overs, as the borrower (and indirectly the other
12 Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) at 11.
parties to the facility agreements and securities) had substantial rights. The rights are inconsistent with the terms of the facility agreements and securities. Amongst other things, there was no obligation on ASB to partially release a security, but such an obligation was central to Mr Sgargetta’s argument. There is an express provision which makes clear that partial release of a security was a matter entirely within ASB’s discretion.
[43] The facility agreements, and related securities, are standard form documents for commercial loans. There was no suggestion from Mr Sgargetta that he did not understand the terms of the documents he was signing, both as a guarantor and as a director of Sleep Overs, Evergreen and Remarkables. What Mr Sgargetta is arguing is that there were significant oral variations of provisions recorded in the documents that were signed. But in that regard there is also no evidence from or for Mr Sgargetta that variations of the documents were sought. What the evidence does clearly establish, including evidence of the written communications from, or on behalf of, Sleep Overs, Evergreen and Remarkables, is that Sleep Overs was seeking loans to refinance existing loans, that Sleep Overs sought long term loans, with mortgage securities for the full terms, and that is what Sleep Overs got.
[44] Assuming, but without determining, that Mr Sgargetta could rely on contractual provisions not expressly contained in the facility agreements, he would have to provide an evidential foundation to argue that, at the time each of the facility agreements was entered into, ASB had, at the least, represented to Mr Sgargetta, or other representatives of Sleep Overs, by words or conduct, that ASB in making the loans accepted an obligation to facilitate syndication. Mr Sgargetta sought to provide an evidential foundation for the argument on the basis that ASB had seen prospectuses of Sleep Overs and these prospectuses refer to syndication. There is no evidence that either of the prospectuses referred to by Mr Sgargetta were presented to ASB as part of Sleep Overs’ applications for the loans. In any event, neither of the prospectuses advances Mr Sgargetta’s argument. The prospectus he referred to in connection with the Evergreen loan makes no reference to syndication. The prospectus Mr Sgargetta referred to in relation to the Remarkables loan does refer in very general terms to syndication as one of several possible structures for investors, but this falls a long way short of providing a foundation for an argument that
syndication obligations became part of the terms of the facility agreements. There is other evidence which further diminishes any inference that might be drawn to the effect that ASB had bound itself in relation to syndication.
[45] There is evidence from and for Mr Sgargetta of communications with ASB after the facility agreements were entered into and relating to syndication. ASB accepts that there were some communications in this regard. But none of the evidence Mr Sgargetta relies on is evidence of ASB’s agreement, expressly or through representations, amounting to a variation of the existing facility agreements and securities and binding ASB in some way to allow Sleep Overs to proceed with syndication.
[46] A large part of the evidence from and for Mr Sgargetta is directed to dealings with ASB in 2015 and following, commencing in around April and May 2015 when loan defaults began to occur. This evidence, or at least contentions, from Mr Sgargetta’s perspective, is directed to his dissatisfaction with ASB’s handling of a range of matters. None of this, to the extent that there is evidence as opposed to bare contentions, would provide a defence to the summary judgment application.
[47] Ground 3 is the contention that ASB wrongfully appointed the receivers. There is no evidential foundation to support what is a very generalised allegation. There was clear power in the loan documents to appoint receivers.
[48] There is Mr Sgargetta’s contention that ASB is liable in damages for sales of Evergreen Lodge and Remarkables Lodge for less than their market value. The properties were sold by the receivers, not by ASB, and were sold by the receivers in exercise of their powers, and subject to their duties, as receivers. As a matter of law, the acts of the receivers are not attributable to ASB because the receivers were the agents of Sleep Overs, Evergreen and Remarkables. Section 6(3) of the Receiverships Act 1993 provides that a receiver appointed by, or under a power conferred by, a deed or agreement is the agent of the grantor unless it is expressly provided otherwise in the deed or agreement. The agreements in this case expressly provide that a receiver is the grantor company’s agent.
[49] Any claims relating to the sales of the properties, or in respect of other acts of the receivers, can only be claims against the receivers.
Ground 5: loan facilities and guarantees void for breach of the Fair Trading Act
[50] Mr Sgargetta’s own argument removes the foundation for an order under s 43 of the Fair Trading Act declaring the facility agreements and guarantees void. In Mr Sgargetta’s written submissions for the hearing, referred to as “hearing particulars” Mr Sgargetta summarised his grounds of opposition. The first ground is what I have described as ground 1. The second ground is recorded as follows:
Misrepresentation, false and misleading –
We state & can unequivocally evidence that – by the bank agreeing to, and then later frustrating and ultimately blocking the syndication release and settlements, was false and misleading and therefore the contract/guarantees are void for misrepresentation. Therefore a breach of FTA 1986. Sections 9,
10, 11 and 13.
This is only if (a) [ground 1] does not succeed therefore the Plaintiff is estopped of its summary judgment application under promissory estoppel.
[51] The premise for Mr Sgargetta’s argument to have the contracts declared void is that the representations were terms of the contracts and these terms were breached. If they were terms of the contracts, and ASB breached obligations relating to syndication, the claim is not one that can give rise to a finding that the original agreements were void. The claim remains a counterclaim for damages for breach of contract. Mr Sgargetta cannot bring a claim for breach of the terms of the contract and at the same time contend that the contract is void. That is the effect of s 6 of the
Contractual Remedies Act 1979.13
[52] Mr Sgargetta should be held to his own arguments. But if the argument is reconstructed under the Fair Trading Act, the substance of the argument, whether it is based on s 9 or s 13 of the Fair Trading Act, would amount to a contention that Sleep Overs, Mr Sgargetta, Evergreen and Remarkables, were induced to enter into the facility agreements, and to provide the guarantees, as a consequence of representations of ASB, by words or by conduct, that ASB would facilitate
syndication and that, at the time when these representations were made by ASB,
13 Now contained in s 35 of the Contract and Commercial Law Act 2017.
there was in fact no intention on the part of ASB to facilitate syndication. There is no evidential foundation for any such proposition.
[53] A further difficulty for Mr Sgargetta is that, even if there was an arguable foundation for an application for an order declaring the facility agreements and guarantees void, this would not prevent ASB recovering, as a minimum, the balance of the principal outstanding for each of the loans made.14 If ASB obtains and enforces judgment on its claim, which is for the balance of the principal and interest, and if Mr Sgargetta in a subsequent proceeding obtained an order declaring the
facility agreements and guarantees void, ASB might be required, in consequence, to repay the interest part of the judgment, but it could not be required to repay the principal.
Ground 6: “inducement and unconscionability”
[54] Mr Sgargetta did not provide any particulars, or evidence, to identify “inducement” as a recognised cause of action separate from any of the matters already discussed. It appears to be an element of what is contained in the arguments about misrepresentation or false or misleading conduct, and adds nothing to those arguments.
[55] Unconscionability could provide a cause of action if Mr Sgargetta is intending to refer to an unconscionable bargain, but with this remaining ground of opposition he has not provided a foundation for a defence to the summary judgment claim.
[56] The general nature of an unconscionable bargain was described by Lord
Brightman in the Privy Council in O’Connor v Hart as follows:15
An unconscionable bargain [is] a bargain of an improvident character made by a poor or ignorant person acting without independent advice which cannot be shown to be a fair and reasonable transaction. “Fraud” in its equitable context does not mean, or is not confined to, deceit; “it means an unconscientious use of the power arising out of the circumstances and conditions of the contracting parties”; Earl of Aylesford v Morris (1873) 8
Ch App 484, 490. It is victimisation, which can consist either of the active
14 Hermann v Charlesworth [1905] 2 KB 123; Laws of New Zealand Contract at [218].
15 O’Connor v Hart [1985] 1 NZLR 159 (PC) at 171.
extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.
[57] Mr Sgargetta has not provided any evidence to support an action for relief founded on the doctrine of unconscionable bargains.
Disposal of Mr Sgargetta’s counterclaims
[58] Rule 12.12(2) makes provision for disposal of a summary judgment application where, as here, the Court is satisfied under r 12.2 that the defendant has no defence to the plaintiff’s claim, but where the defendant sought to advance a counterclaim. If the Court considers that the defendant has a possibly meritorious counterclaim, the Court may grant summary judgment to the plaintiff, but stay execution of the judgment pending resolution of the counterclaim, and possibly on terms relating to prosecution of the counterclaim. There are other possible options, but that is the only one that needs to be noted in the circumstances of this case.
[59] For the following reasons I have concluded that this is not a case warranting a stay of execution of the plaintiff’s judgment:
(a) ASB has an established contractual right to require payment in full from Mr Sgargetta irrespective of any counterclaims he may have.
(b)For reasons already recorded, Mr Sgargetta has not established an arguable evidential foundation to resist payment of ASB’s claim, quite apart from that contractual right of ASB.
(c) Mr Sgargetta, before the summary judgment hearing, had ample opportunity to file an opposition to the summary judgment application, and a defence and any counterclaims, not only in a form that complied with the High Court Rules, but also containing proper particulars of an arguable defence and any counterclaims supported by evidence.
(d)A stay of execution, which is a matter of discretion, would effectively amount to the granting of a substantial indulgence in Mr Sgargetta’s
favour in the face of his continued failure to comply with, and to some extent in defiance of, directions of this Court.
Discovery application
[60] Discovery on summary judgment applications is a matter for the discretion of the Court. I was not persuaded that this is a case requiring an order for discovery before determination of the summary judgment application.
Judgment for the plaintiff
[61] There is judgment for the plaintiff in a sum of $598,340.15. This is established as the total indebtedness of the defendant to the plaintiff, including interest, as at 11 April 2017.
[62] There are further claims for interest at a contractual rate of 22.5 per cent per annum. ASB is entitled to judgment for interest, but this part of the claim was not addressed in any detail in submissions. For the purposes of a judgment ASB is to file a memorandum on the following:
(a) Identifying the evidence which establishes that ASB is entitled to a contractual rate of 22.5 per cent per annum, and interest at that rate both before and after judgment.
(b)The claim in the statement of claim is for interest on $598,340.15 at the contractual rate from 9 September 2016. The date was amended in the summary judgment application to interest from 11 April 2017, until the date of judgment. The 11 April date appears to be correct in terms of the earlier quantification of the main judgment sum of
$598,340.15, but this interest claim is for interest at the contractual rate on a sum which already includes interest at the contractual rate. This aspect of the claim will have to be adequately addressed in the memorandum by identifying the evidence which establishes the principal sum on which interest is calculated, and any other contractual provisions, already in evidence, which bear on the rate of
and calculation of interest both before and after judgment. Evidence, and in particular contractual provisions, is to be identified by reference to the page or pages in the bundle of documents where the particular evidence appears, as well as the tab number, and not simply by reference to the first page of a contractual document.
[63] There is a claim for indemnity costs. The memorandum for ASB should also set out the grounds on which indemnity costs are sought. Assuming this is a claim pursuant to a provision or provisions in the contractual documents, the provisions are to be identified.
[64] Mr Sgargetta’s documents in opposition include Stuart Dunlop as a “plaintiff/defendant by counterclaim”. There are no grounds for Mr Dunlop to be included in the intituling of any documents, whether part of Mr Sgargetta’s opposition or counterclaims, or otherwise. Mr Dunlop’s name is to be treated as struck from the intituling of these documents. He remains as a deponent on some affidavits.
[65] The formal orders and directions are as follows:
(a) There is judgment for the plaintiff in a sum of $598,340.15 and judgment for that sum may be entered now.
(b)Judgment is reserved on the plaintiff’s claims for interest and indemnity costs, pending receipt of a memorandum for the plaintiff, covering the matters recorded at [62] above and memorandum from Mr Sgargetta in reply.
(c) The memorandum for the plaintiff is to be filed and served within 20 working days from the day of this judgment.
(d)A memorandum in reply from Mr Sgargetta is to be filed and served within a further 20 working days.
(e) In the absence of further directions, the remaining issues in respect of
interest and costs will be determined on the papers.
Woodhouse J
9