Beneficial Finance Ltd v Brown - [2017] NZHC 964

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000983 [2017] NZHC 964

BETWEEN
BENEFICIAL FINANCE LIMITED

Plaintiff

AND

SUSAN CLARE BROWN First Defendant

AND

AIDAN MCALISTER BARR Second Defendant

Hearing: 10 April 2017

Appearances:

A W Johnson for Plaintiff
S D Campbell for First Defendant
No appearance for Second Defendant

Judgment:

12 May 2017

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
[on plaintiffʼs summary judgment application]

Introduction

[1] The plaintiff, Beneficial Finance Ltd (Beneficial) is a finance company. The defendants were associated with NZ Clean Energy Systems Ltd (Clean Energy). Clean Energy was put into liquidation by its shareholders on 9 June 2016.

[2] Clean Energy had been a trading company. It wanted to obtain immediate finance for working capital when customers placed orders for its systems. In May
2014 and June 2015, it entered into factoring agreements with Beneficial. The parties called them “Invoice Financing Agreements”. The agreements were in materially identical terms. I will generally refer to the second agreement only as that
is the agreement on which Beneficial sues (the contract).

BENEFICIAL FINANCE LIMITED v BROWN [2017] NZHC 964 [12 May 2017]

[3] Clean Energy’s obligations under the contract were guaranteed by the two defendants and others. Susan Brown was, when the contract was entered into, the director, chief executive and a shareholder of Clean Energy.

[4] Beneficial asserts that when Clean Energy was placed in liquidation it was indebted to Beneficial under the contract (and continues to be).

[5] In this proceeding, Beneficial sues two of the guarantors and seeks summary judgment.

[6] Ms Brown defends the proceeding and opposes summary judgment. The other guarantor sued, Aidan Barr, has taken no step in the proceeding.

[7] By its statement of claim and evidence in support, Beneficial asserted that the debt owed by the defendants was $374,300.94 together with interest accruing on a compounding basis. By an updating affidavit filed shortly before the hearing, Beneficial identified the debt as $299,370.90 at the date of hearing.

The issues

[8] It is common ground between Beneficial and Ms Brown that the contract binds the parties and that is the terms of the contract which are to be applied.

[9] Ms Brown by her notice of opposition asserted that she has an arguable defence for three reasons:

The correct plaintiff issue

(a) It was Financial Holdings Ltd (Financial) and not Beneficial which lent the money to Clean Energy – it is Financial (not Beneficial) which has suffered any loss – only Financial may sue.

The variation issue

(b)Beneficial (through one Ian McLaren), without the knowledge or consent of Ms Brown, varied the contract by permitting Clean Energy

to retain borrowings and to not pay accrued interest – Ms Brown invokes the doctrine of discharge or avoidance by material alteration and additionally asserts that any variation was oral and therefore precluded by the express terms of the contract.

The quantification issue

(c) Beneficial has failed to provide evidence which adequately verifies the alleged debt.

The contract

Entry into the contract

[10] Beneficial…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NZHC 964
Decision Date: 12 May 2017

CaseChat Overview and Summary

Beneficial Finance Ltd (Beneficial) sued Susan Clare Brown (Ms Brown) and Aidan McAlister Barr (Mr Barr) for the amount owing by Clean Energy Systems Ltd (Clean Energy) under two invoice financing agreements. Ms Brown defended the proceeding and opposed summary judgment. The court had to decide three issues: (1) whether Beneficial was the correct plaintiff; (2) whether the contract had been varied without the knowledge or consent of Ms Brown; and (3) whether Beneficial had provided evidence which adequately verified the alleged debt. The court found that Beneficial had not satisfied its onus of showing that there was no defence to the claim. As to the first issue, the court found that ownership of the funds advanced to Clean Energy remained with Beneficial until Clean Energy received the money, at which point a debt was created. As to the second issue, the court found that the evidence filed left uncertainty about both the arrangements which may have taken place, and any (contractual) intention of the parties concerning those arrangements. As to the third issue, the court found that Beneficial had not provided evidence of how it had quantified its losses and that the sum claimed did not reflect Clean Energy’s liability to Beneficial under the financing agreement. The court dismissed Beneficial’s application for summary judgment.

Orders