Bank of New Zealand v Lothian Partners Capital Limited

[2021] NZHC 3339

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-795

[2021] NZHC 3339

BETWEEN

BANK OF NEW ZEALAND

Plaintiff

AND

LOTHIAN PARTNERS CAPITAL LIMITED

First Defendant

GLENOCE LAND JOINT VENTURE LIMITED
(IN RECEIVERSHIP)
Second Defendant

GALT NOMINEES LIMITED (IN RECEIVERSHIP)

Third Defendant

GEORGE CHARLES DESMOND KERR
Fourth Defendant

PYNE HOLDINGS LIMITED (IN RECEIVERSHIP)

Hearing:

7 December 2021

Appearances:

Z Kennedy / H Jacques for Plaintiff

G Blanchard QC for First, Second, Third and Fifth Defendants
J Goodall / K F Stolbergers / S J Nicholson for Fourth Defendant

Judgment:

7 December 2021

Reasons:

7 December 2021

REASONS FOR JUDGMENT OF LANG J

[on application for adjournment of trial]

This judgment was delivered by me on 7 December 2021 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

BNZ v LOTHIAN PARTNERS CAPITAL LTD [2021] NZHC 3339 [7 December 2021]

Registrar/Deputy Registrar Date……………

[1]    In this proceeding the Bank of New Zealand (the BNZ) seeks judgment against the defendants in the total sum of approximately $68 million together with interest and costs. The BNZ contends the defendants are liable to it under two loan facilities dating back to 2008 and 2010. Of the sum claimed, approximately $23.5 million relates to interest said to be payable under the facilities.

[2]    The BNZ has applied for summary judgment and the defendants have filed documents in opposition. Two earlier fixtures were adjourned because of COVID-19 restrictions and the unavailability of the defendants’ counsel. The application for summary judgment is currently scheduled to be heard on 13 and 14 December 2021.

[3]    The defendants have applied for an adjournment of that fixture on the basis that the BNZ has recently filed and served further material to which they need to respond. The BNZ opposes the application for an adjournment and wishes the existing fixture to proceed as scheduled.

[4]    At the conclusion of the hearing on 7 December 2021 I dismissed the application for an adjournment. I now give my reasons for doing so.

The defendants’ arguments

[5]    The principal ground the defendants advance in support of the application is that they need to respond to material they received from the BNZ on 29 November 2021.

[6]    When the BNZ filed the present proceeding in May 2021 it did not disclose any transaction records relating to the two loan facilities for the first two to three years in which they were in force. The defendants say these were important because, if repayments were missed or there were errors in the BNZ’s calculations during this period, it would have an exponential effect on quantum given the fact that interest has been calculated over a 13 year period.

[7]    In July 2021 the defendants’ solicitors sought disclosure of the transaction records for this period. On 1 August 2021 the BNZ’s solicitors advised that this information was being compiled but that it was taking longer than expected.

[8]    The BNZ’s reply evidence was due on 23 July 2021 but it was not filed and served until 5 August 2021. The defendants say they expected to receive the records they were seeking in the reply evidence. However, that was not the case. After receiving the BNZ’s reply evidence the solicitors acting for the fourth defendant, Mr George Kerr, immediately queried the absence of the transaction records. This prompted further correspondence between the parties. Eventually, on Monday 29 November 2021, the BNZ filed and served a 300 page “Updating Affidavit” that disclosed the records the defendants had been seeking.

[9]    Mr Kerr had earlier engaged Kroll, an international firm of forensic accountants, to carry out a review of material relating to the two facilities that he has been able to download from his own computer. Kroll has been using this to reconstruct the transactions that occurred under the two facilities since their inception. At the end of November 2021 Kroll was in the final stages of completing its report. Mr Kerr believes Kroll has identified significant errors in the way the BNZ has calculated the amounts the defendants now owe under the two loan facilities.

[10]   Kroll was scheduled to provide a report to the defendants’ solicitors on or before 30 November 2021 so that it could be presented to the Court at the hearing on 13 and 14 December. However, the receipt of further material from the BNZ on 29 November 2021 means Kroll will now be unable to provide its report until the end of January 2022.

[11]   In addition, on 29 November 2021 counsel for the BNZ filed and served an amended notice of application for summary judgment together with an amended statement of claim. The latter reduces the quantum of the claim and introduces two new causes of action that have not previously been pleaded. These documents were accompanied by a memorandum in which counsel for the BNZ seek leave to rely on affidavits filed in other proceedings.  These  include a very lengthy affidavit from  Mr Kerr. Mr Kerr contends that he will need to file and serve a further affidavit to provide important context to the additional evidence on which the BNZ now seeks to rely.

[12]   The defendants also rely on two subsidiary arguments in support of their application for an adjournment. First, they say the hearing will require the Court to negotiate its way around two complicated loan facilities and a multitude of documentary exhibits. They say the hearing should be conducted when counsel can appear in person rather than remotely as is presently the case. Secondly, they say that any amount found to be owing by the defendants will need to be recalculated in any event once the proceeds of a recently concluded sale of a coastal property have been received.

Decision

[13]   I deal with the last three points first because they are of little substance. First, I do not consider the recent amendments to the statement of claim to be of any significance. They raise narrow legal issues to which counsel for the defendants should be able to respond in short order. Furthermore, counsel for the BNZ confirms that his client will consent to Mr Kerr filing a further affidavit to place statements he has made in earlier affidavits in context. That will obviously need to be done as soon as possible.

[14]   Secondly, it is not presently known when counsel will be able to attend Court in person for cases such as this. However, the Court is now routinely dealing with complex commercial cases with counsel and witnesses appearing remotely. Use of electronic bundles of documents makes this task a great deal easier. There is no impediment to the application for summary judgment being heard with counsel appearing remotely.

[15]   Thirdly, the fact that any amount for which the defendants may be found liable will need to be reduced to reflect further funds received is of no moment so far as the application for an adjournment is concerned.

[16]   The real issue is whether the recently disclosed loan transaction data means the defendants will no longer have a fair opportunity to prepare for the hearing. I have concluded this is not the case for several reasons. First, the defendants’ argument may have had merit if the forthcoming hearing was a substantive trial as to quantum. However, it is not. Rather, the Court will be required to determine an application for

summary judgment in which the onus is on the BNZ to establish that the defendants have no defence to its claim. The defendants are not required to establish the correct quantum of any amount they may owe the BNZ. They need only point to evidence suggesting that a trial is necessary to determine that issue.

[17]   Secondly, Mr Kerr says that Kroll has now virtually completed its report based on the material he provided to it. If Mr Kerr’s evidence is correct Kroll has already identified significant errors in the way the BNZ has calculated the amounts owing by the defendants. There is nothing to prevent Kroll placing its preliminary conclusions before the Court at this stage. They may be sufficient to persuade the Court not to enter summary judgment and to direct a full trial on the issue of quantum. Alternatively, they may persuade the Court that the application for summary judgment should be adjourned part-heard to await updating evidence from Kroll once it has had an opportunity to fully analyse the loan transaction data.

[18]   As matters currently stand I see no reason why it would be necessary for Kroll to analyse the transaction data in order to provide evidence in opposition to the application for summary judgment. If Kroll believes that this is necessary it should give evidence as to the reasons why. That may again persuade the Court to either direct a full trial as to quantum or adjourn the application for summary judgment part- heard to await Kroll’s updating evidence.

[19]   For these reasons I concluded it was not appropriate to vacate the existing fixture at this stage.

[20]   I record that at the conclusion of the hearing Mr Goodall advised me that the defendants will be in a position to file and serve their submissions dealing with all matters other than the Kroll investigation no later than 5 pm on Wednesday 8 December 2021.

Lang J