Bank of New Zealand v Koroniadis

[2013] NZHC 1700

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-271 [2013] NZHC 1700

BETWEEN

BANK OF NEW ZEALAND Plaintiff

AND

KOSTANDINOS EVLAMBIOUS KORONIADIS

First Defendant

ATHANASIOS KORONIADIS Second Defendant

Hearing:	4 July 2013
Appearances:	J. Toebes - Counsel for the plaintiff A. Koroniadis - Second Defendant in person
Judgment:	8 July 2013

JUDGMENT OF JUSTICE D.I. GENDALL

This judgment was delivered by me on 8 July 2013 at 3.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ..................................................................

BANK OF NEW ZEALAND v KE KORONIADIS  [2013] NZHC 1700 [8 July 2013]

[1]      The plaintiff applies for summary judgment against the second defendant only to enforce repayment of an outstanding loan debt it maintains is due from the second defendant as guarantor under a Deed of Guarantee of a loan advanced to Miramar Development Limited (in receivership) (the company) as primary borrower.

[2]      On  20  May 2013  this  Court  granted  summary  judgment  to  the  plaintiff against the first defendant with respect to his guarantee of this debt.  The hearing of this  present  summary  judgment  application  therefore  concerned  only  the  claim against the second defendant.

[3]      A Notice of Opposition to this application was filed by the second defendant on 17 May 2013.

Background Facts

[4]      The company had finance facilities approved by the plaintiff including a fixed rate term loan facility with an original limit of $1.1 million and a current account overdraft facility, subject to personal guarantees being provided by the defendants.

[5]      As security for the bank loans, the plaintiff held a GSA and a first mortgage over a commercial property at 19 Edward Street, Wellington owned by the company. This property was tenanted at the relevant times by three commercial tenants who together paid something in excess of $12,300.00 per month by way of rent.

[6]      The monthly loan repayments to the plaintiff under the term loan facility totalled $10,239.00 and, as I understand it, were originally met from the monthly rental payments made by the tenants of the property.

[7]      As I have noted above, the company’s loan facility overdraft and mortgage were personally guaranteed by the first defendant and the second defendant who were directors of the company.

[8]      In around July 2012 the rental from the three tenants of the Edward Street property which was previously direct credited to the BNZ account of the company

(and from which the monthly loan repayments were taken) ceased. This was because the second defendant had communicated with the tenants at the time advising them that the company required all future rent payments to be made not to the BNZ account but to a new bank account opened with the TSB Bank in the name of the company.

[9]      As a result, cashflow into the company’s bank account with the BNZ stopped

and default occurred under the monthly term loan mortgage payments.

[10]     In addition, at about this time it seems the company failed to pay Wellington City Council rates on the Edward Street property and the Council wrote to the plaintiff as mortgagee requiring payment of these rates.

[11]     Given these defaults under the loan arrangements, by letter of 24 August

2012  the plaintiff made formal  demand for the  debit  balance in  the company’s current account with the bank and required outstanding defaults under the loan arrangements to be cleared.   These defaults were to be rectified by 14 September

2012.

[12]     At the time the plaintiff was experiencing difficulty serving documents on the second defendant.  It seems this 24 August 2012 demand was not received by him until about 5 September 2013 when it was served via his solicitor Mr John Langford.

[13]     The mortgage and loan defaults were not remedied.

[14]    On 18 September 2012 the company was placed into receivership by the plaintiff under the GSA security it held.

[15]     A Notice  under  Section  119  Property  Law  Act  2007  in  relation  to  the plaintiff’s first mortgage over the Edward Street property was then served on the company  on  5  October  2012  specifying  a  remedy  date  for  the  defaults  of  9

November 2012.

[16]     Again difficulty was experienced in serving the second defendant with a copy of this s 119 Notice in terms of s 121 of the Property Law Act 2007 but it seems this

was finally served on him but not until 17 November 2012.   This was after the remedy date specified in the original s 119 Property Law Act Notice.

[17]     None of the company’s defaults under its loan arrangements with the plaintiff were remedied.  The plaintiff now seeks summary judgment against the second defendant as guarantor for the balance loan amount owing as at 7 January 2013, said to be $1,070,795.32, together with a current account loan balance of $36,436.70 and default interest and costs.

[18]     On all of this, Mr Toebes counsel for the plaintiff contended that the present summary judgment application is a relatively simple one notwithstanding attempts on the part of the second defendant to make it complex.  He notes that the second defendant has made in excess of 140 complaints to the Banking Ombudsman against actions of the plaintiff but that none of these have been upheld.  Mr Toebes suggests this is in reality a straightforward case where substantial loan and mortgage default has occurred, demand has been made for payment by the second defendant as guarantor, and he has simply refused to honour his clear and uncontested obligations as guarantor.

Counsels’ Arguments and My Decision

[19]     The present summary judgment application is brought pursuant to r 12.2(1)

of the High Court Rules which provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1)       The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[20]     The principles of summary judgment have been summarised by the Court of

Appeal in Krukziener v Hanover Finance Ltd at [26]:1

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). 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: MacLean v Stewart (1997) 11 PRNZ

66 (CA). 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 is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[21]     Therefore, the present application for summary judgment can only succeed if I am satisfied that the second defendant has no arguable defence to the claim against him based on the term loan facility and other agreements and the guarantee.

[22]     At the outset it is clear that there is no argument between the plaintiff and the second defendant over the following matters:

(a)      The  term  loan  facility  and  current  account  overdraft  facility  in question were provided to the company by the plaintiff.

(b)There  was  default  under  the  term  loan  facility  when  the  regular monthly loan repayments ceased from about August 2012 consequent upon the decisions made by the company (it seems as instigated by the second defendant) to divert monthly rental payments from the tenants of the commercial building from the BNZ to a new account at TSB.

(c)      Finally,  after  the  company  and  its  guarantors  had  been  given opportunities  to  clear  the  default  but  this  had  not  occurred,  the plaintiff called up and made demand for the company’s indebtedness on the company and the guarantors.

(d)A mortgage over the Edward Street property and a GSA are held by the plaintiff for the company’s debt.  Although the plaintiff appointed receivers of the company in September 2012, final mortgagee sale steps for the property are still to be taken.

(e)      None of the documentation held by the plaintiff for all the loans in question including the guarantees given by the second defendant is in any meaningful way challenged by the second defendant.

(f)       The quantum of the indebtedness of the company to the plaintiff bank which is guaranteed by the second defendant and the first defendant jointly and severally pursuant to clause 8.1 of the Guarantee, is also not disputed to any extent by the second defendant here.

[23]     Essentially, as I understand it, the defences advanced by the second defendant relate almost entirely to process issues.   These attempt to raise questions over the service of demands, notices and other documents on the second defendant pursuant to the requirements of the Property Law Act 2007 and issues over whether it can be established that he received the documents in question.

[24]     In support of these contentions, the second defendant has filed the following documents:

(a)       Statement of defence filed 17 May 2013.

(b) (c)	Statement of counterclaim filed 12 June 2013. Notice of opposition to summary judgment application filed 17 May
2013.
(d)	Affidavit of the second defendant dated 17 May 2013.
(e)	Supplementary affidavit of the second defendant dated 11 June 2013.
(f)	Submissions from the second defendant in support of his opposition filed 2 July 2013.
[25]	But,	at the outset I need to say that many of the matters which the second

defendant has endeavoured to raise here in my view are entirely irrelevant to the application which is before me.

[26]     As  best  I  can  tell  from  all  the  material  he  has  provided  including  his submissions at the hearing of this matter, the second defendant’s opposition to this

application and his defences to the plaintiff’s claim are essentially process ones as I

note above, to the following effect:

(a)      He  contends  that  the  plaintiff  should  prove  he  has  received  the demand under the guarantee dated 7 January 2013 and the notice to covenantor  under  s  121  Property  Law Act  served  on  him  on  17

November 2012.

(b)In addition the notice to covenantor served on 17 November 2012 was received after the remedy date specified in the Notice being 9 November

2012.

(c)      The plaintiff has not proved service on him of the demand under the guarantee of 7 January 2013.

(d)In  mid-September  2012  the  second  defendant  contends  he  had  made arrangements to pay the outstanding overdraft amount requested by the plaintiff but this was either refused by the plaintiff, or alternatively additional conditions improperly added requiring repayment also of a debt owing by a related third party company.

[27]     In my view these defences are quickly disposed of.  They relate in the main to issues of process and overall, even if the second defendant is able to establish proof of the matters he alleges (and in this regard his evidence here is confusing, often irrelevant and lacking in reliability) it does not in any way establish that he has been prejudiced by any alleged failures on the part of the plaintiff which may have occurred in serving him with documents in a prompt fashion.  Rather, the evidence before me points to the conclusion that, despite his protestations to the contrary, the second defendant has taken significant steps to evade service of documents throughout the history of this matter and it has only been through persistent attempts on the part of the plaintiffs that he has been provided personally with the various demands and notices required.

[28]     This also leaves on one side the fact that, as one of the two directors of the company, it is difficult to escape the conclusion that the second defendant throughout was fully aware of the continuing default which was occurring with the company’s term loan, overdraft and other arrangements with the plaintiff bank, and the inevitability that default action would follow.

[29]     Indeed, at the 5 September 2012 meeting between officers of the plaintiff bank, the second defendant and his solicitor Mr Langford, there seems little doubt that attempts were made to provide the company and the second defendant with an opportunity to clear the arrears and to re-direct rental payments from the Edward Street tenants to the BNZ account at this point, but these were rejected.  The Court can have little sympathy for the approach taken by the second defendant both personally and as a director of the company and the essentially technical service arguments he has endeavoured to advance in the absence of any substantive defences to justify his opposition to the present application.

[30]     I turn now to the specifics of these arguments which, in any event as I have noted above are quickly disposed of.

Notice to Covenantor under Section 121 Property Law Act 2007

[31] The Notice to Covenantor under Section 121 Property Law Act 2007 was served on the second defendant on 17 November 2012 as I have noted at [16] above. This was after the default remedy date specified in the s 119 Notice to the mortgagor noted as 9 November 2012.

[32]     Section 121 Property Law Act 2007 provides that a copy of the s 119 default notice to a mortgagor must be served on a guarantor “as soon as possible” after service on that mortgagor.   Here, the copy of the s 119 Notice was served on Mr Langford the second defendant’s solicitor on his behalf on 19 November 2012.

[33]    The reason for this delay in service was simply because the plaintiff had experienced some difficulty in serving the second defendant and, despite numerous unsuccessful attempts, this was the earliest occasion on which service could be

effected.  On this, the plaintiff’s process server has provided evidence to the Court first, of the several attempts made to serve the second defendant and secondly, his view that the second defendant, although likely to have been in the property in question at the time simply refused to come to the door, and thirdly, that service could be properly effected by attaching the documents to the door of his home.

[34]     Even leaving aside the question as to whether the second defendant might have been attempting to evade service, it is my  view that the plaintiff has complied with its obligations under s 121 Property Law Act 2007 here, in that a copy of the s

119 Notice was served on the second defendant “as soon as possible” after service on the mortgagor company, given particularly all the circumstances prevailing in this case.  It is noted too that a meeting of all parties including the second defendant and his lawyer Mr Langford had taken place on 5 September 2012 regarding the continuing BNZ loan default.  This was over 2 months before the s 119 Notice was served on the second defendant.  I am satisfied that the delay in service of this Notice on the second defendant as guarantor here could not in all the circumstances have caused any prejudice or lost opportunity to the second defendant to remedy the defaults in question or otherwise.   Nor, given that no final steps to conduct a mortgagee sale of the Edward Street property have as yet been concluded, can it be said that the plaintiff is exercising powers under its mortgage to unduly prejudice the second defendant.  Finally, I repeat that the plaintiff here has complied with its obligations under s 121 Property Law Act 2007 in that I am satisfied it has served a copy of the s 119 Notice “as soon as possible” on the second defendant after service on the mortgagor company.  I dismiss this ground of opposition advanced by the second defendant.

Service of the 7 January 2013 Demand Under the Guarantee

[35]     A letter of demand under the guarantee was sent by the plaintiff bank to the second defendant on 7 January 2013.

[36]    On this aspect, the second defendant contends that the plaintiff should be required to prove that the letter with the attached demand had been received by him. This is notwithstanding the later order of this Court that service of the substantive

court proceedings on the second defendant was ordered to take place by way of substituted service (by affixing the documents to the front door of his residence at 17

Hobart Street, Miramar). This later service did indeed take place on 28 March 2013.

[37]     The  defence  which  the  second  defendant  raises  here  is  again  a  purely technical one based upon process.  In my view, the absence of proof of service of the

7 January 2013 Notice of Demand has not in any way prejudiced the second defendant.  Clearly, he also received a further copy of the Notice of Demand on 28
March 2013 when he was served with these proceedings including the affidavit in support.  In addition, as I understand the position, he has also received a further two copies of the demand, one separately and one with a further set of the proceedings, sent to him by the plaintiff with its email of 7 May 2013.  All this appears to have occurred prior to the preparation and filing of the second defendant’s statement of defence, Notice of Opposition and affidavit in support.

[38]     In all of this, the plaintiff notes that if necessary it could amend its statement of claim to accommodate the position on this summary judgment application, as the Court of Appeal did in BNZ Finance v Smith & Leuchars [1991] 3 NZLR 659 (CA). That is noted, but as I see the position, in any event this is not necessary here.

[39]     And, notwithstanding that the second defendant continues to maintain that he did not receive the 7 January 2013 Notice of Demand from the plaintiff, I am satisfied here on the balance of probabilities that he did in fact receive that Notice of Demand (and probably several copies of it) despite his bare denial to the contrary.

[40]     Significantly  too,  s  25  of  the  Deed  of  Guarantee  signed  by  the  second defendant states in part:

25.3     Notices, Certificates and Demands may be handed to you personally or left at, or posted by pre-paid mail to, or sent by facsimile or email to, your address, fax number or email address shown in the main terms of this guarantee, a different address, fax number or email address subsequently notified in writing by you or your usual place of residence or business last known to the person signing them.

25.4     If posted, notices, certificates and demands from us are considered to have been received at the time they would have been delivered in the ordinary course of the post and in any event at the end of 5 business days.

[41]     Here the evidence before me does indicate the Notice of Demand was posted to the second defendant at 17 Hobart Street, Miramar being the address for service of notices and demands under the guarantee specified on the front page of that document.

[42]     I am satisfied too that under the circumstances prevailing in this case, the second defendant would need to put before the Court some evidence to establish non-service of the demand in question through no fault of his own.  He has not done this.

[43]     I conclude therefore, that there is also nothing in this defence or Notice of

Opposition which the second defendant has purported to advance.

Purported Arrangements to Repay Outstanding Overdraft and Loan Amounts

[44]     In his submissions before me, the second defendant contended that he had made  arrangements  to  pay  the  outstanding  overdraft  amount  requested  by  the plaintiff in full on 18 September 2012.  This contention in the second defendant’s submissions does not seem to be supported in any way by evidence he has provided to the Court.

[45]     Notwithstanding this, the claim by the second defendant in any event would seem to be incorrect.

[46]     The evidence placed before the Court by the plaintiff includes an email from the second defendant to Mr Willdig of the plaintiff bank on the evening of Sunday,

16 September 2013 at 9.48 pm which states:

If the bank is going to place the company into receivership and I would appreciate if you could let me know on Monday, 17 September 2013 ..... if you allow me time to come to some amicable arrangement I will be prepared to respond on Monday night with a proposal ......

[47]     Notwithstanding this and the fact that the mortgagor and defendants had a right to redeem the debt owing to the plaintiff at any time under s 97(1) Property Law Act 2007, no payment of any kind was offered or made by the second defendant

or the mortgagor.  The right to redeem the mortgage debt itself remains even up to the present time, given that the Edward Street property is still not as yet sold.  The debt which is climbing however, remains unpaid.

[48]     Again,  in  my  view,  there  is  nothing  in  this  defence  advanced  by  the defendants.

Complaint that Company Bank Statements were not received

[49]     In addition, during submissions before me the second defendant complained that from early 2010 the plaintiff had not provided company bank statements for its account.  It was this reason it seems that the second defendant advanced for his acknowledged decision to instruct the Edward Street tenants to change their rental payments from the BNZ to the TSB Account around July 2012.

[50]    This explanation in my view is barely credible.   The second defendant throughout would have been well aware of the need to provide funds in the BNZ account to meet the over $10,000.00 per month mortgage payments.  Once rental payments were diverted, and no other monies were paid into the BNZ company account (which was the case), it would have been readily apparent that the loans and mortgage would immediately have gone into default.   To endeavour to pin responsibility for this on some other party such as the bank (through an alleged failure to provide bank statements) in my view is quite inappropriate.

[51]     And, the evidence for the plaintiff in any event is that bank statements were forwarded regularly to the company and the second defendant and it simply is not conceivable that he did not receive these at the box number given by the company to which they were sent.

[52]     Again, in my view there is nothing in this ground of opposition which the second defendant has endeavoured to advance.

Counterclaim

[53]     Finally, the second defendant has filed  in this Court a document headed

Statement of Counterclaim dated 9 June 2003.

[54]     On this aspect, at para 15.1 of the second defendant’s guarantee document it was agreed:

... you must pay us (the bank) without any set-off or counterclaim and without any deduction or withholding ...

[55]     In  his  counterclaim  in  this  case,  the second  defendant  is  making  claims against the plaintiff arising from what he says are the losses that he has suffered first, as a shareholder of the mortgagor (but as I understand it he is not a shareholder) and secondly, as a guarantor claiming not to have received the required s 119 Notice “as soon as possible” after service on the mortgagor.

[56] Even if the second defendant may have a possible cause of action in his counterclaim (and at this point on the material currently before the Court that would seem to me to be unlikely) it is always open to him, if the present summary judgment application succeeds, to make an application for stay of enforcement of that judgment pending determination of his counterclaim. That, however, must take the form of a separate application and, given the no set-off or counterclaim clause in the guarantee which I have referred to at [54] above, this counterclaim provides no defence to the present summary judgment application.

Conclusion

[57]     It will be apparent that for all the reasons I have outlined above, the second defendant has been quite unable to advance any arguable defence to the plaintiff’s summary judgment application.  I find also that the plaintiff clearly has satisfied the Court here that the defendant has no defence to its claim against him as guarantor and the present application must succeed.

[58]     Orders are now made granting summary judgment to the plaintiff against the second defendant as follows:

(a)     Judgment in the sum of $1,070,795.32 being the balance owing in

respect of the Company’s Term Loan as at 7 January 2013;

(b)Interest on the said sum of $1,070,795.32, being 13.15% per annum from 7 January 2013 up to the date of hearing of this application (4 July

2013) a total of $68,668.78.

(c)     Judgment in the sum of $36,436.70 being the balance owing in respect

of the company’s current account as at 7 January 2013.

(d)     Interest on the said sum of $36,436.70, being 19.12% per annum from 7

January 2013 up to the date of hearing of this application (4 July 2013), a total of $3,397.45.

[59]   The plaintiff having succeeded here on its present summary judgment application, it is entitled to costs against the second defendant, which are now awarded  on  a  category  2B  basis  amounting  to  $13,352.00  plus  disbursements totalling $2,256.00.

‘Justice D.I. Gendall’

Solicitors:         JT Law, Solicitors, Wellington