Cameron v Van Dijk

[2020] NZHC 2061

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-121

[2020] NZHC 2061

BETWEEN

JANET HEATHER CAMERON

Plaintiff

AND

LEO VAN DIJK

Defendant

Hearing:	11 August 2020
Appearances:	J M Appleyard and M J Claughton for Plaintiff S P Maloney for Defendant
Judgment:	14 August 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 14 August 2020 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 14 August 2020

CAMERON v VAN DIJK [2020] NZHC 2061 [14 August 2020]

[1]    The plaintiff, Janet Heather Cameron (Ms Cameron), in this application for summary judgment seeks an order for specific performance ordering the defendant, Leo Van Dijk (Mr Van Dijk), to place $1,000,000 in a solicitors trust account, pursuant to an obligation Mr Van Dijk undertook in an agreement for sale and purchase of shares entered into in January 2020.

[2]    Ms Cameron, through a company Narden Ltd, held shares in two other companies, Price Wise Ltd (Price Wise) and Zenith Distribution Ltd (Zenith).

[3]    Ms Cameron agreed to sell her shareholding held through Narden Ltd to the Berryman Trust. She had also been a director of Price Wise and Zenith, and had provided personal guarantees (the Guarantees) to the Bank of New Zealand (BNZ) for facilities operated by Price Wise and Zenith.

[4]    This proceeding concerns the following clauses from the agreement for sale and purchase of shares:

D	Release of Guarantees	(a)	The Purchaser and the Companies will procure the removal of the personal guarantees given by Janet Cameron & Ricky Neumann in favour of BNZ for each of the Companies (Personal Guarantees) as soon as possible and in any event on or before 5pm on 31 January 2020 (Release Date). For the avoidance of doubt, the parties agree that the Purchaser and the Companies will not be in breach of this paragraph to the extent that the failure to achieve release of the Personal Guarantees on or before the Release Date is due to any act or failure to act by BNZ (including any processing delays) or paragraph D(b) has been complied with.
(b)	Without in any way limiting the obligations of the Purchaser and the Companies under paragraph D(a), Leo Van Dijk irrevocably and unconditionally undertakes to Janet Cameron and Ricky Neumann that, if for any reason BNZ has not fully and unconditionally released the Personal Guarantees without any claim upon them by the Release Date, he will on or before 5pm on 1 February 2020 and subject to paragraph D(c), place $1,200,000 in a solicitors trust account (such account and the solicitors undertaking as to the terms on which it holds the funds to be consistent with this agreement and otherwise acceptable to Leo Van Dijk, Janet Cameron and Ricky Neumann (each acting reasonably)) to be held as stakeholder and to be released to: i.           Janet Cameron and/or Ricky Neumann to meet any cost or demand for payment under the Personal Guarantees in respect of the period commencing on and from the date of this agreement and in the amount of such cost or payment; and

ii.          subject to paragraph D(b)(i), Leo Van Dijk (together

with any interest) promptly following the Personal Guarantees being fully and unconditionally released and any amount paid by Janet Cameron and/or Ricky Neumann under the Personal Guarantees has been reimbursed to them.

(c)

The amount of $1,200,000 to be placed in a solicitors trust account under paragraph D(b) will be reduced to $1,000,000 if the Personal Guarantees no longer extend to the letter of credit provided by the BNZ for the Companies in the amount of approximately $200,000.

(d)

The parties acknowledge that the Vendors would not have entered into this agreement without Leo Van Dijk’s undertaking in paragraph D(b).

(e)

The amount to be paid into the solicitors trust account, if required under paragraph D(b), will be paid in full without any set off or deduction. Any amount payable to Janet Cameron, Ricky Neuman [sic] or Leo Van Dijk under paragraph D(b) shall be paid into the bank account nominated by the relevant recipient, in cleared  funds,  without  any  set  off  or  deduction  and  in New Zealand dollars.

(f)

Notwithstanding anything else in this agreement, Holdco can cancel the Holdco Sale by notice in writing to the Companies at any time after 5pm on 1 February 2020 if the Personal Guarantees have not been fully and unconditionally released and funds have not been placed in a lawyer’s trust account in

accordance with this section D.

[5]    While the amount referred to in cl D(b) above is $1,200,000, it is common ground that cl D(c) now applies and the amount of the payment sought is $1,000,000.

[6]    The sale of shares settled on 21 January 2020. By 1 February 2020, being the date referred to in cl D(b) above, Ms Cameron’s Guarantees had not been released by the BNZ. Correspondence from the BNZ shows it required the cash deposit to be made before it would release the Guarantees.

[7]    Clause D(b) set out above, refers to the $1,000,000 being held in a solicitors trust account pursuant to an undertaking, the terms of which were to be agreed, with the parties to act reasonably in reaching the terms upon which the funds are held. The solicitors for Ms Cameron tendered the terms of a draft undertaking. At the hearing, Mr Maloney,  counsel   for   Mr Van Dijk,   confirmed   the   terms   proposed   by  Ms Cameron’s solicitors were satisfactory.

[8]    The notice of opposition refers to the terms of cl D(a) and in particular, its reference to:

… the Purchaser and the Companies will not be in breach of this paragraph to the extent that the failure to achieve release of the Personal Guarantees on or before the Release Date is due to any act or failure to act by BNZ ...

[9]    Under the agreement for sale and purchase of shares, “the Purchaser” is defined as “Andrew Nicholas Berryman and Gillian Josephine Berryman as trustees of the Berryman Trust” and the definition of “Companies” as Price Wise and Zenith.

[10]   In my view, the role of cl D(a) is to prevent the cancellation of the agreement for sale and purchase of shares in the event that the Guarantees were not released. Cancellation may well have been possible due to cl 4(d) which provides that the vendors would not have entered into the agreement without the defendant’s undertaking.1

[11]   Accordingly, cl D(a) does not impact on the obligations on Mr Van Dijk under cl D(b). Clause D(a) protects the purchaser and the companies from cancellation and is not relevant to Mr Van Dijk’s clear and unequivocal obligation under cl D(b).

[12]The notice of opposition states that:

3.(f) The applicant’s personal guarantee is on the verge of being released, such that it is wasteful to require the money to be placed into trust now.

3.(g) There is no risk to the applicant under the personal guarantee as Price Wise Limited and Zenith Distribution Limited are solvent and it is very unlikely that the personal guarantee will be called upon before the companies’ banking facilities are moved to Westpac and the personal guarantee released.

[13]   The reality is, the principal debtors have been referring to the possibility of refinancing for months. Ms Cameron is currently exposed to her Guarantees of the companies’ BNZ facilities when she no longer has any financial interest in or any control of the companies.

1      Contract and Commercial Law Act 2017, s 37(2)(a).

[14]   As to the risk to Ms Cameron being “minimal”, while the detail of the BNZ’s securities are not before the court, it is safe to assume they give the BNZ full discretion as to the order in which it may enforce its securities. While Mr Van Dijk’s evidence is that the BNZ has a charge over the stock of the principal debtors and the benefit of guarantees from other parties, the commercial reality is the BNZ will be entitled to seek to recover under whichever security it thinks best.

[15]   Mr Van Dijk’s counsel submits there is no need to place $1,000,000 into trust as the principal debtors have healthy balance sheets and there is no risk to Ms Cameron that the Guarantees will be called upon. The “healthy balance sheets” are not before the court.

[16]   Mr Van Dijk’s counsel submits the order for specific performance is “wasteful” and will serve only to harm him without any corresponding benefit to Ms Cameron. There is no evidence that Mr Van Dijk is unable to pay the funds into a solicitors trust account.  Mr Van  Dijk does not plead impossibility of performance, which can lead  a court not to order specific performance.

[17]   Mr Van Dijk’s submissions request that if the order sought is made, the obligation to pay the money into trust should take effect no earlier than eight weeks from the date of the order to allow Mr Van Dijk to raise the necessary funds. Again, there is no evidence in respect of Mr Van Dijk’s ability to raise the funds. In effect, Mr Van Dijk seeks an eight week stay. There is no formal application for stay and no evidence as to the need for that time for Mr Van Dijk to raise funds.

[18]   Mr Van Dijk seeks that the order sought by the plaintiff is made on a condition that if Ms Cameron’s Guarantees are released before the money is paid into trust,  Mr Van Dijk is released from the obligation to pay. The second condition he seeks is if the money is paid before the Guarantees are released, the funds shall be immediately released to Mr Van Dijk upon notification to the account holder by the BNZ that the Guarantees have been released.

[19]   The terms upon which the funds are to be held are sufficient to meet the second conclusion.

[20] As to the first proposed condition, I consider such is inherent in the terms set out at [4] above and, accordingly, the order for specific performance that I am going to make, will be subject to a condition that the order will lapse upon the BNZ confirming in writing to Ms Cameron that her Guarantees are fully and unconditionally released.

[21]   Accordingly, I am satisfied Ms Cameron has demonstrated that Mr Van Dijk does not have a reasonably arguable defence to the claim that Mr Van Dijk is to pay into a solicitors trust account the sum required under the agreement for sale and purchase of shares.

[22]   It follows, Ms Cameron is entitled to the orders sought and I make the following orders:

(1)There  is  an  order   for   specific   performance   directing   Mr Van Dijk to place $1,000,000 in cleared funds into the trust account of Wynn Williams, solicitors, Christchurch on the terms set out in the solicitor’s undertaking in the attached schedule to this judgment.

(2)The above order is on the condition that it shall lapse if prior to the payment in order (1) being made, the BNZ confirms in writing to Ms Cameron’s solicitors that her Guarantees have been fully and unconditionally released.

(3)Ms Cameron is entitled to costs in respect of this proceeding, along with disbursements as fixed by the Registrar.

[23]   As the parties have been unable to agree the quantum of costs, counsel for  Ms Cameron are to file a memorandum in support of her costs application within five

working days of the date of this judgment – not more than three pages in length. Any response by counsel for Mr Van Dijk to be filed within a further five working days – again not more than three pages in length, and I will deal with costs on the papers.

Associate Judge Lester

Solicitors:

Chapman Tripp, Christchurch Sandi Anderson, Auckland

Copy to counsel:
S P Maloney, Barrister, E St John, Auckland

SCHEDULE

Date:  2020

[Solicitor’s letterhead]

Solicitor’s undertakings

TO:  Janet Cameron

AND TO:                   Ricky Neumann

AND TO:                   Leo Van Dijk

AGREEMENT FOR SALE AND PURCHASE OF SHARES IN PRICE WISE LTD AND ZENITH DISTRIBUTION LTD – FUNDS HELD IN SOLICITOR’S TRUST ACCOUNT IN RELATION TO RELEASE OF GUARANTEES

Background

1.We refer to the agreement for sale and purchase of shares in Price Wise Limited and Zenith Distribution Limited between Narden Limited, Holdco 2 Invest Pty Limited, Andrew Nicholas Berryman and Gillian Josephine Berryman as trustees of the Berryman Trust, Andrew Nicholas Berryman, Gillian Josephine Berryman, Janet Heather Cameron, Ricky Neumann and Leo Van Dijk, dated 21 January 2020 (the Agreement).

2.Pursuant to clause D(b) of the Agreement, Leo Van Dijk provided an undertaking to Janet Cameron and Ricky Neumann that, if for any reason BNZ had not fully and unconditionally released the personal guarantees given by Janet Cameron and Ricky Neumann in favour of BNZ for each of Price Wise Limited and Zenith Distribution Limited (the Personal Guarantees) by 5pm on 31 January 2020, Leo would on or before 5pm on 1 February 2020 place

$1,200,000 in a solicitors trust account (the Funds).

Undertakings

3.We undertake in favour of Janet Cameron, Ricky Neumann and Leo Van Dijk, that we hold as stakeholder the Funds in our Trust Account and will only release the Funds to:

3.1Janet Cameron and/or Ricky Neumann to meet any cost or demand for payment under the Personal Guarantees in respect of the period commencing on and from the date of the Agreement and in the amount of such cost or payment; and

3.2subject to paragraph 0, Leo Van Dijk (together with any interest) promptly following the Personal Guarantees being fully and unconditionally released and any amount paid by Janet Cameron and/or

Ricky Neumann under the Personal Guarantees has been reimbursed to them.

4.We further undertake that if we receive any request from a party in respect of releasing an amount from the Funds under paragraph 0 or 3.1, we will notify the other parties of that request within 5 working days (Notification); and

4.1if:

(a)       we receive acceptance notices from the other parties (Acceptance Notices); or

(b)      we do not receive any acceptance notice or objection notice from the other parties within 3 working days of the Notification (Deemed Acceptance),

we will release the requested amount from the Funds to the relevant party within 5 working days of receiving Acceptance Notices or Deemed Acceptance; or

4.2if, within 3 working days of the Notification, we receive an objection notice from any party, we will not release the requested amount from the Funds to the relevant party until the dispute has been resolved between the parties.

Notices

5.For the purpose of any notice to be given under paragraph 0, the address or email of each party are those set out under the name of that party in Schedule 1.

Yours faithfully

[Solicitor]