Chatton Properties Limited v Marshall
[2012] NZHC 1042
•15 May 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-000540 [2012] NZHC 1042
BETWEEN CHATTON PROPERTIES LIMITED Plaintiff
ANDJOHN MICHAEL MARSHALL Defendant
Hearing: 15 May 2012
(Heard at Christchurch)
Appearances: L P Mulinder for Plaintiff
A D Marsh for Defendant
Judgment: 15 May 2012
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
[on plaintiff ’s summary judgment application]
[1] The defendant, Mr Marshall, guaranteed a debt on a trade finance facility owed by a company of which he was a director (Data Acquisitions Ltd), to S H Lock (NZ) Ltd.
[2] In this proceeding another company, Chatton Properties Ltd, sues Mr Marshall on his guarantee. It seeks judgment for $909,789.33 together with interest. It pleads that:
On 30 June 2011 LOCK sold, by way of subrogation, its rights under the outstanding loan balance owed by DATA of $806,907.00 (“the subrogated Debt”), the security interest and the personal guarantees to the Plaintiff.
[3] Mr Marshall opposes summary judgment. He asserts in a succinct notice of opposition that Chatton has failed to establish by evidence the material facts of its
title or interest allegedly acquired by subrogation.
CHATTON PROPERTIES LIMITED V MARSHALL HC CHCH CIV-2012-409-000540 [15 May 2012]
The summary judgment principles
[4] The starting point for a plaintiff’s summary judgment is r 12.2(1) High Court Rules which requires that the plaintiff satisfy the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action. The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left with no real doubt or uncertainty on the matter. This flows from the provisions of r 12.2 itself. As Somers J in Pemberton v
Chappell[1] said in relation to the predecessor r 136 that:
[1] Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
the outstanding feature of this provision is that the onus of establishing that there is no defence is cast on the plaintiff.
The plaintiff ’s evidence
[5] The plaintiff alleges that by subrogation it acquired a right or interest in the debt owed by Mr Marshall. Its evidence in support was in an affidavit from Robin Whalley, the director of Chatton. He deposed in his affidavit:
3.On 30 June 2011 Chatton entered into a Deed of Subrogation with an Auckland based financier: S H Lock (NZ) Limited to purchase the outstanding debt: $806,907.00 (“the Debt”) owed by Data Acquisitions Limited (“DATA”) to S H Lock (NZ) Limited, for a confidential amount.
4.The terms and conditions of the transfer of the Debt to Chatton are governed by confidentiality provisions (a copy of the confidentiality addendum to the Deed of Subrogation is attached marked “RW1”).
5.Chatton’s solicitors at the time (Duncan Cotterill) provided other (non-confidential) documentation, in order to give the Guarantor actual notice of the assignment of the Debt, to the Defendant’s solicitor by way of an email on 17 October 2011 (a copy of that email is attached marked “RW2”).
[6] The document he exhibits as the “RW1” referred to in paragraph 4 is indeed a confidentiality provision. It reads:
ADDENDUM TO DEED OF SUBROGATION DATED 30 JUNE 2011
BETWEEN CHATTON PROPERTIES LIMITED, S H LOCK (NZ) LIMITED AND GRAEME RAINSFORD DICK;
1.The following additions are hereby incorporated into the Deed of Subrogation between Chatton Properties Limited, S H Lock (NZ) Limited and Graeme Rainsford Dick; dated 30 June 2011:
1.1The parties agree that they will not disclose any Confidential Information relating to this Deed (excluding those commercial terms which at the date of this Deed are already in the public domain or those which subsequently by agreement between the parties come into the public domain) to any third party other than to their advisers and consultants and where necessary to comply with any applicable law or requirements of any regulatory body without obtaining the approval of the other parties to this Deed.
1.2 “Confidential Information” in the above clause means:
1.2.1 the existence and contents of this Deed;
1.2.2the nature, existence and contents of any meetings, discussions, negotiations or agreements between the parties and their representative advisers in relation to this Deed; and
1.2.3the fact of or reasons for any termination of discussions or negotiations between the parties and their respective advisers in relation to this Deed.
[7] By that addendum the parties to the Deed of Subrogation of 30 June 2011 agreed to keep confidential the very existence and contents of the deed. Almost true to that commitment, when Chatton initially came to this Court it denied both the Court and Mr Marshall knowledge of the contents of the deed. That said, Mr Whalley in his first affidavit, contrary to the terms of the addendum, did disclose the existence of the deed itself.
[8] Mr Marshall then filed his notice of opposition. The notice of opposition in full states as its grounds:
(a) The Defendant admits that he entered into a Deed of Guarantee and Indemnity with S.H. Lock (NZ) Limited on 16 December 2004 (“the Guarantee”).
(b) The Plaintiff claims to have purchased the debt owed by DATA and the benefit of the Defendant's personal guarantee by way of a Deed of Subrogation between S.H. Lock (NZ) Limited and Chatton Properties Limited dated 30 June 2011 (“the Deed of Subrogation”).
(c) Despite requests made by the Defendant the Plaintiff has failed to provide a copy of the Deed of Subrogation to the Defendant and has
failed to exhibit a copy of the Deed of Subrogation to its affidavit evidence.
(d) Neither the Defendant nor the Court can be satisfied that the Plaintiff is entitled to rely on the Guarantee or that the Defendant has no defence to the Plaintiff’s claim.
[9] Mr Marshall, perhaps understandably given the narrow issues raised as to the
plaintiff’s title, did not file evidence in opposition.
The new evidence
[10] Last Friday, two working days before the hearing, Mr Whalley filed a second affidavit. In that affidavit he stated he had had the benefit of reading the notice of opposition. He said he was surprised at reading the suggestion that neither the Court nor the defendant could be satisfied that the plaintiff was entitled to rely on the guarantee. Mr Whalley referred to a document which he had exhibited to his first affidavit. That document was an affidavit as to assets and liabilities which Mr Marshall had provided to Chatton’s solicitors in the course of negotiations concerning the guaranteed claim. In his affidavit dated 7 March 2012, Mr Marshall had referred to this guarantee in these terms:
Personal guarantee owing to Chatton Properties Limited (secured over Data
Acquisitions Ltd assets) $866,519.16 (as at 31.1.12)
[11] Mr Whalley then referred again to the issues of commercial sensitivity and confidentiality which Chatton says surround the Deed of Subrogation. He then adds:
However, in light of the Defendant’s sole ground of opposition filed, Chatton has procured approval from the other parties... to exhibit a sanitised copy of the Deed of Subrogation.
[12] Mr Whalley then attaches the sanitised deed. He adds in relation to two clauses of the deed which are deleted (he refers to clauses 1.1 and 3.3) that they are deleted due to financial/commercial sensitivity reasons. He deposes that they are not material to the issue as to whether Chatton may enforce the guarantee against the defendant.
[13] The Deed of Subrogation is dated 30 June 2011 and has as its parties, Lock, Chatton and one Graeme Dick. The interests of the parties signing are respectively as transferor, transferee and guarantor. The transaction relevant to the present proceeding is that Lock transfers to Chatton by way of subrogation the rights of Lock under the debt, security interest and guarantees which Mr Marshall’s company and Mr Marshall had given to Lock.
[14] Clause 1 of the deed is headed “Purchase Price”. Clause 1.1 begins with the words:
The total purchase price for the Debt, Security Interest and Guarantees being a total of ...
Thereafter the entire balance of cl 1.1 is redacted. That redaction runs to some 12 lines or thereabouts.
[15] Clause 1.2, although not referred to by Mr Whalley as having been redacted, is partly redacted. It reads in its redacted form:
The transferee will pay
(“Settlement Date”) by the deposit of cleared funds into the bank account nominated in writing by the Transferor.
[16] The other redacted clause is cl 3.3, redacted in its entirety. It forms part of the deed headed with “Guarantee and Security”. The Court and indeed the defendant has no knowledge of the content of that clause other than being able to speculate that it probably relates to guarantee and security. Mr Whalley has deposed to his view that it is not material.
[17] This second affidavit is clearly not evidence in reply in the normal sense. The plaintiff in this proceeding chose to assert confidentiality or commercial sensitivity in relation to a document which was key to establishing its title and interest. At the eleventh hour, given the defendant’s understandable opposition based on an absence of direct evidence as to the contract as to transfer of title or interest, the plaintiff elected to pursue a waiver of confidentiality or commercial sensitivity from other parties and to put the evidence before the Court in the context of a reply. It did so two working days before this hearing. The speed with which it has been put
before the Court indicates that the agreement of the other parties to waiver of confidentiality may have been readily obtainable.
[18] The perhaps aggravating feature of the way in which the plaintiff has presented this claim and now sought to bolster this claim is the approach which it has taken vis-a-vis the defendant and the Court in relation to the concept of confidentiality. It is trite that confidentiality of itself does not give rise to privilege. The objection being taken in this case is confidentiality pure and simple.
[19] Lord Wilberforce said in Science Research Council v Nasse:[2]
There is no principle in English law by which documents are protected from discovery by reason of confidentiality alone. But there is no reason why, in the exercise of its discretion to order discovery, the [court] should not have regard to the fact that the documents are confidential, and that to order disclosure would involve a breach of confidence.
[2] Science Research Council v Nasse [1980] AC 1028 (HL) at 1065.
[20] The same general principle was developed in New Zealand law. Numerous are the cases in which this Court, prior to the implementation of the Evidence Act
2006, dealt with orders of discovery and disclosure so as to protect genuine commercial sensitivity. Often that has included agreements and orders whereby disclosure is made but limited to counsel, so that counsel is not handicapped by non- disclosure. This is because the interests of justice require the disclosure of all relevant evidence.[3] For whatever reason in this case the plaintiff chose to come to Court on a summary judgment application without considering any such approach to effect disclosure of a document plainly relevant. Mr Mulinder submitted to the Court that on the basis of the second affidavit filed by Mr Whalley the plaintiff had
now cured any shortcomings in its original application.
[3] Aktiebolaget Hassle v Pacific Pharmaceuticals Ltd [1991] 3 NZLR 186 (HC), per Gallen J at 205.
[21] For my part, I have come very close to finding that, (even allowing for indications from the Court of Appeal that applications for summary judgment should not be summarily dismissed merely for default at the outset in putting forward adequate evidence on the key issues), that this was a case which might have called
for summary dismissal of the present application. As it is, I refrain from deciding the
case on that basis. Rather I am satisfied that the application must be dismissed for reasons arising from the content of the Deed of Subrogation that is now put forward.
[22] First, I am not satisfied on the Deed of Subrogation as exhibited that the transfer referred to on the 30 June 2011 deed has taken place. The time of transfer is defined by cl 2.1. Under the heading “Subrogation” it is stated:
In consideration of the payment of the Purchase Price the Transferor hereby transfers to the Transferee by way of subrogation all of the Transferor’s right, title and interest in the Debt, Security Interest and Guarantees with effect from the Settlement Date.
[23] The plaintiff through Mr Whalley’s second affidavit has chosen to redact from the Deed (cl 1.2) any detail as to what the settlement date is. I cannot be satisfied that the settlement date has arrived in terms of the evidence provided. Mr Marsh also made submissions as to concerns which the defendant and the Court might legitimately have as a result of the substantial redaction of cl 1.1 concerning purchase price. There is room for some concern that some relevant provision may not be before the Court or the defendant when cl 1.1 is as long as it is. On its own that might not be decisive but in combination with the previous factor and the next, it is. The next factor is the entire redaction of cl 3.3. On first blush cl 3.3 might appear logically to relate more to the obligations of the guarantor, defined in the contract as Mr Dick. Clauses 3.1 and 3.2, which it follows, both concern the guarantor (i.e. Mr Dick). But cl 3.4 (which immediately follows cl 3.3) states:
This Agreement is conditional upon the Transferee and the Guarantor entering into a deed of indemnity.
[24] Again, I have no evidence as to whether the Deed of Indemnity was executed, and therefore no evidence to establish whether and when the Deed of Subrogation (which I take to be the “Agreement” referred to) became unconditional.
[25] For these reasons, I am not satisfied as to Chatton’s title.
[26] There is a further difficulty on which neither counsel initially addressed me. I gave both the opportunity to comment after an adjournment. Laws of New Zealand
has this observation in relation to the definition and basis of the principle of subrogation:
Persons who exercise rights of subrogation do not acquire an independent cause of action and do not sue in their own right, since they are subrogated to the rights of the original claimant.[4]
The authority provided for that statement of the law is the judgment of the Court of Appeal delivered by Thomas J in New Zealand Society of Accountants v ANZ Banking Group (New Zealand) Ltd.[5] The Laws of New Zealand summary is an accurate summary of the law as there stated.
[4] Laws of New Zealand Equity at [74].
[5] New Zealand Society of Accountants v ANZ Banking Group (New Zealand) Ltd [1996] 1 NZLR 283 (CA) at 287 – 288.
[27] There is no explanation in this case, in which the plaintiff’s proposition is that its title arises by subrogation, as to why Chatton is the plaintiff and not Lock. On the face of it, Lock is the appropriate plaintiff.
[28] Finally, Mr Mulinder submitted that this was a case where, given the additional evidence now filed by Mr Whalley and the admission apparently contained in Mr Marshall’s affidavit as to a debt owing to Chatton, that the Court could properly deal with any shortcoming in the plaintiff’s original documents by reallocating the incidence of costs. He particularly put emphasis on the apparent admission by Mr Marshall and the suggested strong indication that the Court can be satisfied that the debt exists in the way the plaintiff claims. That position is made difficult for the plaintiff by virtue of the law relating to who may sue in the context of subrogation to which I have just referred.
[29] I am also not satisfied that Mr Marshall’s statement in his affidavit of assets and liabilities as to the debt owed to Chatton can be taken as a correct statement of the legal position. Whether the debt is now owed to Chatton or remains owed to Lock is a question of mixed fact and law. Exchanges of correspondence are exhibited by Mr Whalley to his first affidavit. In response to an express request from Mr Marshall’s solicitors on 24 February 2012 to see the Deed of Subrogation,
Chatton’s solicitors observed as follows:
(a) That documentation had been provided “evidencing the deed of subrogation” (which statement has not since been explained by Mr Whalley), and;
(b) Lock had insisted on confidentiality, and;
(c) Chatton’s instructions were that the deed would not be disclosed at that time.
[30] An express request for disclosure and the opportunity to disclose was thereby with the plaintiff well before it commenced this proceeding and this summary judgment application.
[31] In relation to any summary judgment application, the Court ultimately, if satisfied on the evidence as a whole that the plaintiff’s claim is established, must turn to consider the residual discretion which exists in relation to any summary judgment. That discretion is as indicated by the words in r 12.2 that the Court “may give judgment”.
[32] I adopt as helpful the analysis of authorities in McGechan on Procedure at
HR12.2.11 where the writers state:
The residual discretion may be invoked to avoid oppression or injustice to the defendant where:
…
(ii) The proceedings are such that the opportunity should be given to allow discovery or other interlocutory applications to be concluded;
(iii) The circumstances of the case disclose very unusual features, the presence of which leads the Court to conclude that the entry of summary judgment would be oppressive or unjust; or
…
[33] The plaintiff’s late decision to provide a copy of the Deed of Subrogation and then to provide only a redacted version, brings this case in my view to a point where the residual discretion would have been exercised against granting summary
judgment (had the Court not already found that the plaintiff had failed to discharge its onus). Mr Marsh submitted appropriately in my view that this Deed of Subrogation is a document which the defendant should have had the opportunity to consider and enquire into well before the litigation commenced. That opportunity has been denied to the defendant by the plaintiff’s refusal to seek waiver of confidentiality at an earlier stage, and to thereby allow the defendant to explore those matters before the plaintiff commenced this proceeding. Issues of commercial sensitivity remaining in relation to the redacted parts of the deed can properly be dealt with through further directions made by the Court in relation to discovery and inspection. This is clearly in my view a case within the category referred to in the second McGechan consideration, and arguably within the third consideration.
Costs
[34] Mr Mulinder accepted, having regard to the way in which the plaintiff had gone about this proceeding, that it may be a case for reallocation of the normal incidence of costs. The decision of the Court of Appeal in NZI Bank Ltd v Philpott[6] generally leads to the conclusion that costs on a unsuccessful plaintiff’s summary judgment application should be reserved. That is not the invariable rule. It need not apply where a plaintiff has presented its evidence in an unsatisfactory way at the
outset, and may not apply so strongly where prima facie the wrong plaintiff has commenced the litigation. This is a case where, given the conclusion I have reached, the defendant should have costs of this summary judgment application fixed and awarded in any event. Costs should be on a 2B basis. The defendant clearly has a debt owing but has legitimate issues in relation to the evidence adduced by the plaintiff and in particular as to the plaintiff’s title or interest.
Conclusion
[6] NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).
[35] I find that the plaintiff has not discharged the onus upon it to satisfy the Court that the defendant has no defence to the cause of action and the statement of claim. I
would also, if necessary, exercise the residual discretion against entering judgment.
If this plaintiff elects to proceed, the normal interlocutory procedures should be available to the defendant before he is put to trial. Nothing in this judgment cuts across the weight of evidence which indicates that the defendant is indebted to someone.
Orders
[36] I order that:
(a) The plaintiff’s application is dismissed.
(b)The plaintiff is to pay to the defendant in any event the costs of this application together with any disbursements to be fixed by the Registrar.
Timetable
[37] A timetable is required for further steps:
(a) In the event that this plaintiff intends to proceed, it is to confirm that position in writing to the defendant by 22 May 2012.
(b)In terms of r 12.13, the defendant is to file and serve his statement of defence, if any, by 29 May 2012 (assuming the present plaintiff has elected to proceed).
(c) Counsel are thereupon to discharge their obligations in terms of conferring as to all issues of discovery and inspection in terms of r 8.2
High Court Rules with a view to providing to the Court detailed directions for consideration.
(d)If there is to be an application to substitute or add any other plaintiff, such application is to be filed and served by 8 June 2012 and is to be given as a first hearing date 2.00 pm, 3 July 2012.
(e) Any opposition to any such application is to be filed and served by 15
June 2012.
[38] I adjourn the proceeding to 2.00 pm, 3 July 2012 by telephone conference
(Associate Judge Osborne).
[39] Counsel are to file, no later than 22 June 2012, a memorandum which records:
all agreements reached in relation to the extent and requirements of
discovery and inspection;
any steps necessary for the disposal of interlocutory applications;
the suitability of the case for Judicial Settlement Conference or alternative dispute resolution;
the estimated duration of the hearing;
allocation of hearing date;
timetable directions for trial;
the names and number of witnesses (and which are factual and expert);
any particular directions required in relation to experts; and
confirmation that a back-up fixture will be accepted (or if not, why not), subject to prior notification.
Solicitors:
Rout Milner Fitchett – - Email: [email protected]
Saunders Robinson Brown - Email: [email protected]
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