Boutique Body Corporates Limited v Covekinloch Auckland Limited
[2016] NZHC 1729
•28 July 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-000991 [2016] NZHC 1729
BETWEEN BOUTIQUE BODY CORPORATES
LIMITED Appellant
AND
COVEKINLOCH AUCKLAND LIMITED
Respondent
Hearing: 21 July 2016 Appearances:
A K Hough and L Deane for the Appellant
B Vautier for the RespondentJudgment:
28 July 2016
JUDGMENT OF HINTON J
This judgment was delivered by me on 28 July 2016 at 11.00 am pursuant to Rule 11.5 of the High Court Rules
……………………………………………………………………
Registrar/Deputy Registrar
Solicitors:
Grimshaw & Co, Auckland
Glaister Ennor, Auckland
BOUTIQUE BODY CORPORATES LIMITED v COVEKINLOCH AUCKLAND LIMITED [2016] NZHC 1729 [28 July 2016]
Introduction
[1] This is an appeal against the decision of Judge Harrison in the District Court at Auckland, dated 9 May 2016, refusing to grant summary judgment against the respondent, CoveKinloch Auckland Ltd (CoveKinloch) and awarding costs to the respondent.
Background
[2] The appellant, Boutique Body Corporates Ltd (Boutique), manages the accounts of Body Corporate 372942 (the Body Corporate). It operates a separate trust account in which all of the Body Corporate’s funds are held.
[3] From 2012, CoveKinloch was engaged by the Body Corporate to assist with remedial works at an apartment building known as “The Esplanade” and to provide litigation support services for associated proceedings.
[4] In July 2014, Mr Leishman wrote to CoveKinloch, on behalf of the Body Corporate, saying there were funding concerns and asking for deferral of outstanding fees until the outcome of a mediation concerning the Esplanade claim. CoveKinloch agreed.
[5] CoveKinloch carried out further work, following a request by the Body Corporate’s solicitors, which led to a further fee proposal by CoveKinloch in March 2015. The Body Corporate accepted that proposal “without prejudice to any claim the Body Corporate might have for losses arising from any inadequacies in previous engagement on the project”. Further work was carried out by CoveKinloch.
[6] On 21 August 2015, the Body Corporate’s solicitors advised CoveKinloch that the Esplanade claim had been settled at mediation the previous night. The email said: “Please provide us with invoices for any outstanding WIP, or confirm that all work has been billed.” On 24 August 2015, Mr Leishman of Boutique also emailed CoveKinloch, thanking them for their contribution and confirming that the Esplanade claim had settled. He said: “We would appreciate it if you could arrange
to forward any final invoice for work to date. If possible, we would appreciate the invoice by Monday, 31 August 2015.”
[7] CoveKinloch provided details of outstanding invoices, which covered the period from 30 November 2014 to 25 August 2015.
[8] On 25 September 2015, Boutique deposited to CoveKinloch’s bank account the sum of $123,950.76, in payment of those invoices. At 1.39 pm that day, CoveKinloch received remittance advice from Boutique with a handwritten note “payment to bank 25/9/2015”. At 1.59 pm, CoveKinloch acknowledged payment by email, with the note: “Thank you [Ms Lockwood], lovely way to end the week!”
[9] Immediately after payment, Boutique notified CoveKinloch that they were mistaken as to their authority to pay on behalf of the Body Corporate, and requested a refund. Apparently the Body Corporate was considering disputing the invoices.
[10] CoveKinloch refused to refund. Boutique then refunded the Body Corporate itself, and sued CoveKinloch.
District Court decision
[11] Judge Harrison declined to grant summary judgment on the basis that, even if the money were paid by Boutique to CoveKinloch under a mistake, CoveKinloch was in any event entitled to retain the money because the payment was made as “good consideration” for the services it had provided to the Body Corporate. The application for summary judgment was accordingly dismissed.
[12] The Judge awarded costs against Boutique on a 2B basis.
Appeal and summary judgment principles
[13] This appeal is by way of rehearing.1
1 High Court Rules, r 20.18.
[14] To succeed in its appeal, the appellant must show that there was an error of law or principle; or that the Judge failed to take relevant factors into account or took irrelevant factors into account; or was plainly wrong.2
[15] The sole issue on a summary judgment application is whether the plaintiff has satisfied the Court that the defendant has no defence to the claim.
[16] The principles are well settled, and are summarised in this way:3
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] 1NZLR 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).
Mistake of fact
[17] If A pays money to B under a mistake of fact, which causes A to make the payment, A is prima facie entitled to recover it as money paid under a mistake of fact.4
[18] The mistake of fact alleged here is a mistake as to authority to pay.
[19] A claim to recover money paid under a mistake, may fail if the payment is made for good consideration. The most common case is where the money paid has
the effect of discharging a debt. This is known as the defence of good consideration.
2 K v B [2010] NZSC 112, [2011] 2 NZLR 1.
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
4 Stiassny v Commissioner of Inland Revenue [2012] NZSC 106, [2013] 1 NZLR 453.
[20] A good description of this defence is set out in the judgment of Robert Goff J (as he then was) in Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd:5
(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so. (Emphasis added)
Discussion
[21] The District Court Judge said that the defence of good consideration applies here, i.e. CoveKinloch was entitled to receive the amount paid to it by Boutique as “good consideration” for the services CoveKinloch had provided to the Body Corporate.
[22] I would agree with that finding, if the payment had been made by the Body Corporate. However, in these circumstances, I disagree. I consider, as the appellant submitted in the District Court, that Goff J’s statement of the law does support the appellant’s position. For the defence of good consideration to apply, the payment would need to discharge a debt owed to the payee by the payer, or owed by a third party by whom the payer is authorised to discharge the debt. Here, the payee was Boutique. Boutique did not owe the debt. The debt was owed by the Body Corporate, “a third party” to use Goff J’s language. For the defence of good consideration to apply, Boutique would need to have been “authorised to discharge the debt”. That authority may be actual or apparent.
[23] The defence of good consideration therefore does not provide a short answer on these facts. The question remains: was Boutique authorised to discharge the
debt, or was there a mistake as to authority to pay?
5 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] 1 QB 677 at 695.
[24] The respondent submitted that Goff J’s statement of principle was limited to a bank/customer relationship. However, his Honour drew on a number of authorities, not all of which were banking cases, and his statement of principle is put in general terms. I do not see any material distinction between the bank’s paying without a mandate (and, therefore, the payment being out of its own money) and Boutique’s alleged position. Boutique has made the payment out of the Body Corporate funds, but allegedly considered itself obliged to refund that money. It is the same net effect.
[25] I return to the question at issue here: was Boutique authorised to discharge the debt, or was it mistaken? The District Court Judge did not make a finding in this regard.6 That question is, as the appellant itself described it, a question of fact. It is also disputed by the respondent. As such, it is prima facie not suitable for summary judgment.
[26] The appellant says there is clear affidavit evidence from three witnesses, such that the Court can be left without any real doubt or uncertainty as to the lack of authority. However, the evidence is not so clear and the only direct evidence comes from one witness, Mr Leishman. Further, other than the Body Corporate’s response to the March 2015 fee proposal, there is no documentation, prior to the payment, that supports the appellant’s version of events; for example, that there was a dispute between the Body Corporate and CoveKinloch, or that Boutique was directed not to pay CoveKinloch. To the contrary, the email correspondence suggests an apparent preparedness on the part of the Body Corporate to pay CoveKinloch.
[27] This is not therefore one of those cases where a dispute as to fact can be answered on a summary judgment basis. The respondent must be able to test the evidence of the appellant’s witnesses under cross-examination. This is a matter that
can only be dealt with at a trial.
6 The Judge’s general statements about the agency relationship between Boutique and the Body Corporate at [28] were not intended to be a finding of authority to pay, as is evidenced from his comments at [27].
Result
[28] I therefore agree with the Judge that the application for summary judgment should be dismissed, but for different reasons.
[29] The Judge awarded costs in favour of CoveKinloch. I do not consider the application was brought improperly or erroneously. It had some chance of success and Boutique may yet succeed. The District Court Judge reached, in effect, a substantive decision in favour of CoveKinloch on the summary judgment application. I do not go so far. I consider costs should be reserved, which is the general rule on summary judgment applications.
[30] The appeal is dismissed, except as to costs, which instead of being awarded in favour of the respondent, are reserved.
[31] Costs on the appeal are also reserved. I note that the appellant has had a measure of success, albeit not overturning the end result.
-------------------------------------------- Hinton J
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