Bank of New Zealand v Rowley
[2012] NZHC 826
•30 April 2012
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-2446 [2012] NZHC 826
BETWEEN BANK OF NEW ZEALAND Plaintiff
ANDDAVID INGRAM ROWLEY First Defendant
ANDBARRIE JAMES SKINNER Second Defendant
ANDBARRIE JAMES SKINNER AND DAVID INGRAM ROWLEY IN THEIR CAPACITY AS TRUSTEES OF THE TPS ASSET TRUST
Third Defendant
ANDBARRIE JAMES SKINNER AND DAVID INGRAM ROWLEY AS TRUSTEES OF THE TPS ASSET NO. 2 TRUST
Fourth Defendant
Hearing: 23 April 2012
Appearances: J Toebes for the plaintiff
M Dalmer for the defendant
Judgment: 30 April 2012
JUDGMENT OF CLIFFORD J
Introduction
[1] The plaintiff, Bank of New Zealand (“BNZ”), provided on demand overdraft and credit card financial accommodation to TPS Accounting Limited (“TPS”). Each of the defendants issued to BNZ an on demand guarantee of TPS’ liabilities in respect of that financial accommodation. BNZ made demand on TPS and each of
the defendant guarantors on 19 July 2011. BNZ now seeks summary judgment
BANK OF NEW ZEALAND v ROWLEY AND SKINNER HC WN CIV-2011-485-2446 [30 April 2012]
against each of the defendant guarantors for the amounts it says are owing to it by
TPS.
Facts and issues
[2] A considerable amount of factual material was placed before me by way of affidavit. As relevant to this application, however, the facts can be stated relatively simply.
[3] The first and second defendants, Messrs Rowley and Skinner, are: (a) directors of TPS;
(b) the trustees of the third defendant, the TPS Asset Trust; and
(c) the trustees of the fourth defendant, the TPS Asset No. 2 Trust. [4] The defendants accept that:
(a) when BNZ made demand on TPS and the defendant guarantors on
19 July 2011, TPS owed BNZ $496,734.02 on its overdraft facility,
$45,775.75 with respect to its credit card accommodation and that interest was accruing on those amounts at 13.42 and 14.95 per cent per annum respectively; and
(b)by 2 November 2011 TPS owed BNZ $502,896.35 and $46,860.64 on its overdraft and credit card accommodation respectively and that interest was accruing as before. It is for those amounts and that interest that BNZ now seeks summary judgment against the defendants.
[5] The defendants also accept that TPS has not paid the amounts it owes BNZ
and that they are liable as guarantors to BNZ.
[6] What the defendants say, in response, is that TPS has a claim against BNZ which, when taken account of, reduces the amount owed by TPS with respect to its overdraft accommodation and therefore by them under their guarantees. Until that claim is resolved, they say, there is uncertainty as to the amount owed by TPS to BNZ and in turn by them to BNZ under their guarantees.
[7] That claim is said to arise in this way:
(a) BNZ acknowledges that in the period up to 18 February 2011 it had overcharged TPS $27,227.01 of interest and $3,395.18 of service fees with respect to TPS’ overdraft facility. Those errors were discovered as a result of a complaint TPS made to BNZ on 8 February 2011. The amounts in question (some $30,622.19 in total) were then credited to or reversed out of TPS’ overdraft account.
(b)The defendants acknowledge that BNZ has correctly calculated and credited or reversed the amounts of its overcharges.
(c) The defendants claim however that in addition to those correctly credited or reversed amounts, TPS is entitled to unspecified additional compensation for the losses it incurred by reason of BNZ’s overcharging.
[8] Therefore, and notwithstanding their acknowledged liability to BNZ, summary judgment should not be entered against them.
Summary judgment principles
[9] Rule 12.2(1) of the High Court Rules applies to this application for summary judgment. That rule provides:
12.2Judgment 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.
[10] The principles of summary judgment were summarised by the Court of
Appeal in Krukziener v Hanover Finance Ltd:[1]
[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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; [1979] 3 WLR 373 (PC), at p 341; p 381. 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).
Therefore, BNZ’s application for summary judgment can only succeed if I am satisfied that the defendants have no arguable defence to BNZ’s claim on them as guarantors.
Submissions
[11] Mr Toebes first submitted that, given it was accepted BNZ had correctly credited or reversed the amount of interest and fees overcharged, the defendants were in fact asserting that TPS was entitled to compensation for, as Mr Toebes put it, the fact that there had been an error by BNZ, rather than for losses arising as a consequence of that error. Mr Toebes conceded, however, that in terms of the normal principles applying to damages for a breach of contract – here the bank/customer contract – additional compensation could be claimable in circumstances such as these. An example might be where a bank customer incurs costs to investigate a bank’s error and have the matter resolved in its favour. Such a claim for an unliquidated amount would, as a counterclaim to demand for a liquidated amount, give rise to a right of equitable set-off. Mr Toebes therefore acknowledged that, if the Court considered there was something in the claim for compensation the plaintiffs had raised, one approach would be to enter summary
judgment in full, and to stay part of that judgment to reflect that claim for
compensation. Alternatively, summary judgment could be given for an appropriate part of TPS’ acknowledged indebtedness to BNZ. BNZ could then, if it so chose, pursue the balance subject to the counterclaim.
[12] For the defendants, Mr Dalmer submitted that the existence of TPS’ counterclaim for compensation, and the circumstances in which that claim had been formally raised with BNZ, meant that this was a situation where the Court should decline summary judgment. Mr Dalmer referred in particular to the following factual matters:
(a) TPS had first raised the overcharging issue with BNZ on 8 February
2011.
(b)By 16 March 2011 BNZ had credited TPS’ overdraft amount with the amount owing, but on 9 May 2011 TPS had indicated in writing to BNZ that it was dissatisfied with that response, and that it was claiming further compensation.
(c) On 4 July 2011 TPS had made a formal written complaint to BNZ’s internal complaints resolution unit, raising the issue of that compensation, of an apology and of further assurances. Before that internal complaint could be completed, BNZ had made demand in writing for the repayment of all amounts owing under the overdraft and credit card accommodation. Thus, at the time demand was made TPS was – by reference to the claim it said it had for compensation – disputing the amount of its indebtedness to BNZ.
(d)As matters transpired BNZ’s internal complaints resolution unit had rejected TPS’ complaint on 25 August 2011, but offered $500 on a without prejudice basis recognising the inconvenience TPS had suffered. That same day BNZ had exercised its right to put TPS into receivership. As a consequence of that, the director defendants were no longer in control of TPS and could not take the matter further with the Banking Ombudsman and, failing satisfactory resolution there, beyond.
[13] Mr Dalmer referred me to two cases: Sayles v Sayles and Herring v Herring.[2]
In Sayles, Wylie J discussed the discretion given by r 12.2 to decline summary judgment where, even though there was no defence to the claim in question, the Court is concerned that some injustice may be caused by entering judgment or that the Court may be being used, whether intentionally or not, as an instrument of oppression. The context there was relationship property proceedings arising out of a de facto relationship where the Matrimonial Proceedings Act 1963 did not apply. Summary judgment was declined on the basis that all issues arising should be considered at the same time so as not to prejudice one of the parties. In Herring v Herring a similar approach was taken by the majority in the Court of Appeal, where again the Court decided that summary judgment should be declined because of the desirability of resolving all issues between parties to relationship property proceedings comprehensively. Mr Dalmer submitted this was a situation where, because of the existence of the counterclaim for compensation, the potential injustice if summary judgment was entered against the guarantors when that claim had not been resolved meant that the Court should exercise its discretion and decline summary judgment.
Analysis
[2] Sayles v Sayles HC Auckland CP1262/86, 2 December 1986; Herring v Herring [2010] NZCA
500, [2011] 2 NZLR 433.
[14] Two issues arise.
[15] The first is whether, given what the defendants say is TPS’ counterclaim for compensation, the amount owed by TPS and in turn by them is certain so that, as well as having no defence on liability, they also have no defence on quantum.
[16] The second is whether, even if the position is certain as regards liability and quantum, the Court should nevertheless in its discretion decline BNZ’s application for summary judgment so as, in the defendants’ characterisation, to ensure TPS’ claim for compensation can be taken account of appropriately.
[17] I acknowledge that, at least in theory, TPS may have some claim to compensation arising out of the acknowledged breach of the banker/customer
contract that occurred when BNZ overcharged interest and fees on the overdraft account. That is I accept that, in theory, contractual damages could be due from a bank to a customer in an amount in excess of the actual amount of overcharged interest or costs. For example, and as noted, if a customer incurs costs in quantifying the amount of an overcharge and drawing that matter to a bank’s attention, such costs could properly be claimable as contractual damages in accordance with normal principles. However, here the defendants have done little more than raise the possibility of such a claim. At one point they quantified what would be an appropriate payment by reference to the amount of interest and fees that had in fact been overcharged. That was, in my view, a highly optimistic estimate.
[18] Be that as it may, and as Mr Toebes submitted, one way to respond to the possibility of such a claim would be to give BNZ summary judgment in part, and to leave it to claim the balance of the amounts owing from the guarantors subject to their assertion that TPS has a counterclaim for all or part of that balance.
[19] Such an approach was considered by Eichelbaum J in D Clive Davis Ltd v Waugh and Rimmington.[3] There defendants to a claim for summary judgment were found to have an arguable case for some set-off. The quantum of that could not be determined on affidavit. Therefore the Court could not conclude that the defendants had no arguable defence on quantum. As McGechan points out, however, the position was reconsidered by the Court of Appeal in Australian Guarantee Corporation (New Zealand) Ltd v McBeth.[4] The Court of Appeal in that case held that there was no reason to prevent judgment being given for an amount which was indisputably due and owing, but which was only part of a claim and therefore not the whole of the relief sought under the particular causes of action.
[3] D Clive Davis Ltd v Waugh and Rimmington HC Palmerston North CP63/88, 4 August 1988.
[4] Australian Guarantee Corp (NZ) Ltd v McBeth [1992] 3 NZLR 54
[20] The general principle is that the Court may take a robust and realistic approach where the facts warrant it. Bearing that principle in mind, and on the basis that – as Mr Dalmer accepted – there is here no dispute as regards by far the largest part of the amount claimed by BNZ, I consider that it is appropriate to enter summary judgment for part of the total amount claimed. The defendants themselves
have said that, in effect, they regard $30,622.19 as the appropriate measure of their
.
claim. Allowing for some headroom, I think it is appropriate here to enter summary judgment for BNZ for the amount claimed with reference to the overdraft amount less the sum of $40,000. Taking a robust and realistic approach, I cannot envisage how the defendants could ever succeed in a claim for anything in excess of that amount: indeed, I think it is unlikely they would ever succeed for anything like that amount. But that approach preserves for them any possible benefit of TPS’ claim for equitable set-off.
[21] Therefore, there will be summary judgment against each of the defendants for the amount owing as regards the overdraft facility, less $40,000, namely
$462,896.35, together with interest thereon at 13.42 per cent per annum from 2
November 2011 until payment, and for the amount owing in respect of the credit card accommodation, namely $46,860.64, together with interest thereon at 14.95 per cent per annum similarly.
[22] The question of costs was not discussed before me. However I see no reason why costs should not follow the event in the normal course on a 2B basis. If the parties are unable to agree on costs, brief submissions may be filed within two weeks of the date of this judgment.
[23] I note finally that Mr Dalmer did not pursue two points that had been raised in the defendants’ original notices of opposition: these were that judgment should not be entered because BNZ had in some way committed itself not to proceed to make demand and that there had been some irregularity in service. In my view Mr Dalmer was wise not to pursue those points.
“Clifford J”
Solicitors:
JTLaw, Wellington for the plaintiff ([email protected])
ID Hay, Wellington for the defendants (Counsel: M. Dalmer – [email protected])
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