Church v Ellis
[2024] NZHC 2121
•31 July 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-3112
[2024] NZHC 2121
UNDER the High Court Rules 2016 IN THE MATTER
of a debt collection
BETWEEN
DAVID JOHN CHURCH
Plaintiff
AND
BRIAN ROBERT ELLIS
Defendant
Hearing: 2 July 2024 (by AVL) Appearances:
C T Jolliffe and S M Judson for Plaintiff W C Pyke for Defendant
Judgment:
31 July 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 31 July 2024 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………..
CHURCH v ELLIS [2024] NZHC 2121 [31 July 2024]
[1]David Church is the brother-in-law of Brian Ellis.
[2] Mr Church’s family trust, the Amand Trust, was a 42.65 per cent shareholder in ASPAC Dairy Holdings Limited (ASPAC), now in receivership.
[3] Mr Ellis was the director of ASPAC for a short time and it is undisputed he was closely involved with ASPAC.
[4] The Amand Trust made shareholder advances directly to ASPAC. Those advances are not directly in issue in this proceeding but rather, the potential for overlap between those advances and other advances Mr Church made to Mr Ellis and which Mr Ellis directed be paid directly to ASPAC, has to be addressed.
[5] Mr Ellis requested Mr Church provide him funding to support ASPAC. Mr Church made advances to Mr Ellis who, as I have said, directed the funds be paid directly to ASPAC. The advances were made between September 2018 and July 2021.
[6] Mr Ellis provided security to Mr Church by way of a mortgage over a property on Waiheke Island owned by a company, Benhar Properties Limited, of which Mr Ellis was a director.
[7] Mr Church seeks summary judgment for what he says is a shortfall in what he is owed by Mr Ellis following the mortgagee sale of the Waiheke Island property.
[8] Mr Church relies on a deed of acknowledgment of debt called a Deed of Confirmation (undated but signed no later than early July 2021) (The Deed). The Deed was intended to replace two prior deeds. The background to The Deed is recorded as follows:
(a)Brian Ellis as debtor and David Church as creditor entered into a Deed of Acknowledgement of Debt dated 26 September 2018 for lending of an amount of $225,000 (Original Debt Deed).
(b)The Original Debt Deed provided that Benhar Properties Limited granted a mortgage in favour of David Church over the properties at 467 and 469 Sea View Road, Waiheke, Certificates of Title 541768 and 541769. A caveat was registered over the property at 469 Sea
View Road on 28 September 2018 in favour of David Church. The property at 467 Sea View Road has subsequently been sold.
(c)The Parties also entered into a Deed of Variation of Acknowledgment of Debt dated 13 May 2021 for lending of an amount of $111,000 (Deed of Variation) pursuant to the terms of the Original Debt Deed.
(d)Separately, the Creditor has lent (i) an amount of $465,154.07
406,050.22to the Debtor prior to the date of this Deed which was undocumented between the parties; and (ii) an amount of$170,000$180,000 [handwritten change] on the date of this deed, (together , the
Further Debt).
(e)The Parties note that certain of the funds provided to the Debtor by the Creditor have, at the request and on behalf of the
CreditorDebtor, [handwritten change] been paid direct to ASPAC Dairy Holdings Limited.
(f)The Parties are entering into this Deed to acknowledge and confirm the intention of the Parties in relation to the amounts owed pursuant to the Existing Deeds and Further Debt and the repayment and security position of the same.
(g)The Creditor and Debtor also acknowledge that they are currently in dispute over whether (in addition to the debt under Existing Deeds and the Further Debt) there has been additional lending of approximately
$400,000. This disputed lending is not dealt with in this deed.
[9] Under The Deed, Mr Ellis confirmed he was indebted to Mr Church for the “Outstanding Amount”, which is defined as follows:
2.1 (d) Outstanding Amount means
$742,050.22971,154.07$981,154.07 [handwritten change] (being the sum of the amount outstanding under the Original Debt Deed, the Deed of Variation and the Further Debt) plus any amounts designated as a Further Advance by the parties pursuant to this Deed.
[10] The background to cl 2.1(d) of The Deed contains handwritten changes. Mr Pyke, counsel for Mr Ellis, in his submissions refers to the execution of The Deed being irregular and noting the handwritten changes were not initialled by Mr Ellis and not explained. However, Mr Ellis does not assert in his affidavit that the changes were not present when he signed The Deed. Absent any evidence from Mr Ellis, then the assertion of irregularity does not found a defence.
[11] The Deed contemplated that Mr Church may make Further Advances to Mr Ellis. These are referred to in The Deed as “Further Advances” with cl 3.1(a) providing:
3.1Further Advances: The Parties each agree and acknowledge that:
(a)the Creditor may advance further amounts to the Debtor from time to time under this Deed, in the Creditor’s sole discretion (Further Advances). The Parties will confirm in writing any amounts to be designated as a Further Advance under this Deed (and which shall form part of the Outstanding Amount); and
[12] Mr Ellis confirmed he would be indebted to Mr Church for these Further Advances.1
[13] Mr Ellis was obliged to repay the outstanding amount on the occurrence of the earlier of one of the three following events:
3.3Repayment: The Parties agree and confirm that the Debtor shall repay the Outstanding Amount on the earlier of:
(a)an insolvency Event occurring in relation to the Guarantor or ASPAC Dairy Holdings Limited, company number 6380452;
(b)bankruptcy (or any other similar) proceedings being threatened or commenced in relation to the Debtor;
(c)immediately on demand by the Creditor (provided that, in respect of an amount of $361,896.92, 3 months’ notice of such demand must be given by the Creditor).
[14] I will return to the significance of the $361,896.92 referred to in cl 3.3(c) of The Deed.
[15] Under The Deed, security was provided to Mr Church over a Waiheke Island property (already referred to).
[16] Property Law Act Notices (PLA Notices) were issued in July 2022 by Mr Church, which expired on 9 September 2022. One of the issues in this proceeding is whether an agreement was reached to extend the time to satisfy the PLA Notices to
1 The clause under which Mr Ellis acknowledges liability refers to “Further Debt”. “Further Debt” is not a defined term but it is clear that Mr Ellis was accepting liability for Further Advances.
30 September 2022. Mr Church says pursuant to that arrangement, Mr Ellis committed to pay interest on the outstanding debt. Mr Ellis denies an agreement was concluded and says further that any agreement reached was cancelled by him when it was breached by Mr Church. The claim for interest by Mr Church is dealt with as a separate part of this judgment.
[17] The PLA Notices were not remedied. An application to restrain the Waiheke Island sale was heard by Lang J on 7 November 2022 and dismissed by him in a reserved judgment released the same day.2 It was Benhar Properties Ltd as mortgagor that applied for Lang J’s injunction but the judgment also deals with The Deed. Mr Ellis was the deponent for Benhar Properties Ltd in that application and, at least as recorded in the judgment, did not dispute the indebtedness then claimed to be
$1,196,154.07. I note no challenges to The Deed based on the handwritten changes is referred to in Lang J’s judgment.
[18] The Waiheke Island property was sold at mortgagee sale on 23 November 2022, with settlement the same month. The net sale proceeds were
$783,310.38. Mr Church says the amount outstanding at that stage was
$1,365,195.50. That left owing, after the net sale proceeds on Mr Church’s reckoning, the sum of $581,885.12. That amount includes $115,628.78 of interest. Mr Church seeks judgment for $581,885.12 in this proceeding along with interest from 6 December 2022 and indemnity costs pursuant to The Deed.
Summary judgment principles
[19]In Pemberton v Chappel,3 Somers J in the Court of Appeal observed:
… the words “no defence” have reference to the absence of any real questions to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.
2 Benhar Properties Ltd v David John Church [2022] NZHC 2904.
3 Pemberton v Chappel [1987] 1 NZLR 1 (CA) at 3.
[20] While the plaintiff always has the overall onus, it must be able to depose to a belief that there is no defence, it is not required to anticipate defences of which it has no notice.4
[21] This point is apposite here as the notice of opposition does not give details of any specific defence. References such as “as appearing in the statement of defence and counterclaim” and “as appearing in the affidavit of Robert Brian Ellis”, are singularly unhelpful. It is not for a plaintiff to trawl through pleadings and affidavits to discern just what defences are being raised. As I will discuss below, the point is that Mr Ellis is critical of Mr Church not addressing certain matters where, in my view, Mr Church was not given notice that such would be in dispute. Where notice was given, as will be seen, the outcome in some cases is that Mr Ellis’ points were upheld.
[22] The Court is entitled to take a robust approach to summary judgment applications.5
Affirmative defences
[23] Mr Ellis relies on three defences. The first is a challenge to the inclusion of specific advances in the amount claimed.
[24] Mr Church, in his affidavit, has produced a ledger recorded “Loan - Brian Transactions”.
[25] Following the mortgagee sale, Mr Church’s solicitors reported the net proceeds received to Benhar Properties Ltd and Mr Ellis and they provided a copy of the ledger between Mr Church and Mr Ellis. That report was sent on 6 December 2022 and spans the period 28 October 2018 to 5 December 2022.
[26] The loan summary gives 1 July 2021 as the date of The Deed and records the debt due as at that date at $1,101,154.07. This is on the basis $120,000 advanced on 30 June 2021, which is a disputed loan, is included as a “Further Advance”. If the
4 Greenbank New Zealand Ltd v Haus [2000] 3 NZLR 341 (CA) at [19].
5 Krukziener v Hanover Finance Ltd [2028] NZCA 187 (2008) 19 PRNZ 162 at [26].
$120,000.00 is deducted from the total as at 1 July 2021 then the amount is
$981,154.07, being the outstanding amount in The Deed.
[27] To arrive at the figure of $981,154.07 two repayments by Mr Ellis are included in the ledger; being $210,000 on 16 October 2020 and $225,000 on 3 November 2020.
[28] These acknowledged repayments are significant to the wording of The Deed and I will come back to this separate ground of defence below.
[29] However, it is critical that I emphasise at this point that other than six payments which Mr Ellis asserts were in fact advanced directly to and therefore owed by ASPAC, Mr Ellis did not at the time, and does not now, deny the accuracy of the loan transaction record produced by Mr Church.
[30] I immediately accept that Mr Ellis takes issue with the six transactions just mentioned. Two of these payments are 30 June 2021 payment of $120,000 said by Mr Church to be a “Further Advance” under The Deed, and $15,000, recorded on the loan ledger, which Mr Ellis says was in fact advanced by Mr Church’s son. However, the point is that Mr Ellis does not deny the listed advances were made. That is, he does not dispute the mathematical accuracy of the ledger that reconciles to the
$981,154.07 recorded as the amount outstanding in the Deed. While Mr Pyke submits that Mr Church has failed to provide a proper accounting in respect of the various transactions, the fact is Mr Ellis did not dispute the accuracy of Mr Church’s schedule until Mr Pyke’s submissions. Absent a dispute as to the figures, there was no need for independent accounting evidence as suggested by Mr Pyke.
[31] That said, it is of course necessary to address whether Mr Ellis has raised arguable defences in respect of the six advances he says should be excluded from the claim.
Loan sourced from Mr Church’s son — disputed loan 1
[32] On 16 January 2020, the sum of $15,000 was received by Mr Ellis, paid from Mr Church’s son’s bank account in the first instance. Mr Church has reimbursed his son for that payment. Mr Ellis does not assert that he entered a loan agreement with
Mr Church’s son. The funds were requested from Mr Church who arranged for them in the first instance to be paid by his son as a matter of convenience. The loan agreement in respect of this sum was between Mr Church and Mr Ellis. As with Lang J, I consider the source of Mr Church’s funding for the loan advanced to be irrelevant.
[33] I am satisfied the fact that the money was paid from Mr Church’s son’s bank account in the first instance does not provide a defence to Mr Ellis. It is irrelevant to the contractual arrangements between Mr Ellis and Mr Church.
“Further Advances”
Disputed loan 2 of $120,000
[34] Pursuant to cl 3.1(a) of The Deed, Mr Church says he made the following three Further Advances:
(i) 30 June 2021 — $120,000.00
(ii) 20 July 2021 — $70,000.00; and
(iii) 22 July 2021 — $25,000.00.
[35] Mr Ellis acknowledges the July 2021 advances are Further Advances in terms of cl 3.1 of The Deed, as he provided confirmation in writing they were Further Advances under The Deed. On each date the July 2021 advances were made, Mr Church sought and obtained from Mr Ellis by email confirmation they were covered by The Deed.
[36] However, in respect of the June 2021 payment, Mr Church did not seek such confirmation until 8 August 2021. Mr Ellis denies this amount can be a Further Advance for the purpose of The Deed as cl 3.1(a) has not been satisfied.
The $120,000 “Further Advance”
[37] I am satisfied that Mr Ellis has a reasonably arguable defence in respect of this advance.
[38] Clause 3.1 of The Deed, set out at [11] above, required the parties to confirm in writing whether an amount would be designated as a Further Advance under The Deed. As I have said, Mr Church was careful to see that occurred contemporaneously with the two advances in July 2021. However, in respect of the 30 June 2021 transaction, Mr Church did not send an email seeking confirmation from Mr Ellis until 8 August 2021.
[39] Mr Ellis did not reply to the 8 August 2021 email and so he did not provide confirmation of the status of the loan as a Further Advance for the purpose of The Deed.
[40] Also, on 8 August 2021, the Amand Trust wrote to ASPAC calling up what it asserted was the then outstanding amount it was owed of $4,290,102.22. A detailed breakdown of the amount was attached to the letter of demand. Mr Church’s counsel emphasised Mr Ellis does not deny requesting the advance of $120,000. However, that is not the point. With there being shareholder advances made directly from Amand Trust to ASPAC, as well as advances made directly from Amand Trust to ASPAC at Mr Ellis’ direction but payable by him, it is critical to know into which category an advance falls. The Deed provided a process to be satisfied before such payments would be deemed to be Further Advances payable by Mr Ellis. That process was not satisfied.
[41] In Mr Ellis’ affidavit, he says he did not agree to the advance made on 30 June 2021 being one for which he would be liable.
[42] Given the requirements of The Deed governing the status of Further Advances was not satisfied, and given Mr Ellis’ denial he agreed to accept liability for this amount, I am satisfied Mr Church has not demonstrated that Mr Ellis does not have a reasonably arguable defence in respect of the $120,000 advance of 30 June 2021. Mr Church’s counsel emphasised that Mr Ellis did not reply to Mr Church’s email of
8 August 2021. However, that is not an answer to the prescriptive requirements of The Deed. Mr Ellis may have chosen not to reply because he did not agree the
$120,000 was a Further Advance. In any event, his silence in that regard is equivocal.
[43] The fact is, a mechanism to avoid this very issue was agreed and not followed by Mr Church. The risk of that at summary judgment falls on Mr Church for not following that mechanism. Given Mr Church’s care to have contemporaneous confirmation from Mr Ellis in respect of the July 2021 advances, the delay from 30 June 2021 to 8 August 2021 to seek confirmation only reinforces my conclusion that Mr Church has not met his onus in respect of the $120,000.
Amand Trust makes demand on ASPAC
Disputed loans 3—6
[44] On 8 August 2021, the Amand Trust called up its shareholder loan with ASPAC. The demand was for $4,290,102.22. The demand was accompanied by a transaction list identifying each advance making up that sum.
[45] Mr Church says he mistakenly included five advances he personally made to Mr Ellis, in the sum demanded by the Amand Trust from ASPAC on 8 August 2021. Those advances are $10,896.15 on 23 April 2021, $111,000 on 13 May 2021, $70,000 on 28 May 2021, $180,000 on 17 June 2021 and the $120,000 (already dealt with).
[46] Mr Church’s position is that the inclusion of these amounts in the demand was in error. That has been Mr Church’s position since the issue arose in the injunction hearing before Lang J in November 2022. Mr Church’s sworn evidence for that hearing was that these amounts were included in error and Lang J said he saw no reason to question Mr Church’s evidence on this point. Lang J said:6
In this context I consider it noteworthy that Mr Ellis and Mr Benhar have never disputed the amount claimed by Mr Church up until this point. The demands for repayment in the PLA Notices were served on them between 28 January and 30 June 2022. If Mr Church had attempted to seek repayment of $491,896.15 in excess of the sum actually owed, I have no doubt that Mr Ellis and Mr Benhar would have raised this issue much earlier in the piece. I therefore do not consider it raises a serious question to be tried.
6 Benhar Properties Ltd v David John Church, above n 1, at [50].
[47] The $491,896.15 includes the $120,000.00. Mr Pyke is critical of Mr Church not addressing this issue in detail in his evidence. In Mr Church’s reply affidavit, he repeats that these amounts were included in the demand in error.
[48] Mr Church says, referring to his evidence from the injunction hearing, that he amended his proof of debt filed in the receivership aspect to deduct these payments as they were actually amounts owing by Mr Ellis.
[49] Mr Pyke included in his bundle of materials for the hearing, the Receivers’ Reports which Mr Pyke says record the secured creditors’ debt as $4,490,000. Mr Pyke submits the Receivers’ Report is inconsistent with Mr Church’s evidence that he had amended his proof of debt.
[50] I do not consider it satisfactory that these reports were only put before the Court attached to a bundle of authorities. Mr Church’s sworn evidence is not contradicted and is supported by the other material before the Court.
[51]I now turn to each of the disputed amounts.
23 April 2021: $10,896.15 — disputed loan 3
[52]The following point also applies to disputed payments 4, 5 and 6.
[53] Pursuant to cl 3.3(c) of The Deed set out at [13] above, if Mr Church made demand for repayment of the debt, Mr Ellis was to have three months to pay
$361,896.92. The four payments Mr Church says were incorrectly included in the ASPAC claim (leaving the $120,000 to one side) total $371,896.15. Originally, the payment of $180,000 on 17 June 2021 was intended to be $170,000 — this being the amount referred to at (d) of the Background to The Deed set out at [8]. In the Deed, the printed amount of $170,000 is changed in handwriting to $180,000. This
$10,000 difference explains the difference between the amount in cl 3.3(c) and the total of disputed payments 3-6. The handwritten change was not carried over to the amount in cl 3.3(c) of The Deed. The discrepancy between the 92 cents and the 15 cents is not explained but, other than that issue, this factor supports the $10,896.15 being an amount Mr Ellis confirmed by The Deed he was personally liable for as it is
included in the $361,896.92 Mr Ellis had three months to repay if the debt was called up.
[54] Mr Ellis is a solicitor, albeit struck off, and took independent advice in respect of The Deed. It is not credible that he would have accepted personal liability for the precise sums in The Deed without understanding how those amounts were made up. Indeed, Mr Ellis does not assert that he did not understand how the specific accounting amounts in The Deed were made up.
13 May 2021: $111,000.00 — disputed loan 4
[55] The Deed in its Background at (c) refers to $111,000 being recorded in the deed of variation. The deed of variation was dated 13 May 2021 (the Variation) in which Mr Ellis unequivocally acknowledged personal liability for $111,000. The Variation recorded Mr Church had agreed to arrange an advance of $111,000 to or for the benefit of ASPAC on the basis this additional advance would also be secured by the earlier deed of acknowledgment of debt. Mr Ellis is named in the deed of acknowledgment of debt as the debtor and agrees he is indebted to Mr Church for the principal sum and the additional advance.
[56] This is clear confirmation of Mr Church’s evidence that this sum was included in the demand on ASPAC in error as Mr Ellis had agreed he was liable for this sum in the Variation.
28 May 2021: $70,000.00 — disputed loan 5
[57] In the lead up to the signing of The Deed, Mr Ellis sent Mr Church’s solicitor an email commenting on the draft deed noting that the changes requested on behalf of Mr Church were significant. An email of 28 May 2021 records Mr Ellis saying that it would be less than responsible if he did not obtain independent advice and that: “I intend to take considered independent legal advice …” in respect of The Deed.
[58] Mr Ellis continues in his 28 May 2021 email that Mr Church is aware that immediate creditors of ASPAC require paying. Mr Ellis said:
I reiterate the point that in addition to the amount covered in the original deed, I am prepared to acknowledge a further priority for the $110k as set out in the recent deed plus a further $50,000.00 if those immediate creditors can be paid and pending completion of any new arrangements.
[59] Mr Ellis’s reference to $110,000 appears to be an error when the amount recently advanced as recorded in the Variation noted above was $111,000 on 13 May 2021.
[60] Mr Church’s solicitor replied they had advised Mr Church no further funds should be advanced until a document was agreed. However, the email continued that Mr Church was:
… prepared to advance further funds today (he notes that the amount could be up to $70k rather than $50k as you say) on the basis the documentation is tidied up (and signed) next week.
[61] $70,000 was advanced that day. Again, it is untenable for Mr Ellis to say that this was not an amount that he requested and for which he would be liable. Mr Ellis’ 28 May 2021 email is confirmation the $50,000 (which became $70,000) was to be treated the same as the debt in the recent deed — being the Variation.
17 June 2021: $180,000.00 — disputed loan 6
[62] This amount is referred to at para (d) of the Background section of The Deed being the handwritten amount increasing the $170,000 to $180,000. Again, it is untenable for Mr Ellis to say he did not understand or agree that this amount was being advanced to him and he would be responsible to repay it as it is confirmed in The Deed as a sum he would be liable for.
How Mr Ellis frames his argument in respect of loans 2-6
[63]Mr Pyke’s submissions put the argument as follows:
… Mr Ellis deposes that Mr Church did not disclose to him that he had made these advances to ASPAC as “cash injections”, or that he held ASPAC liable
for those sums. Nor did Mr Church send to Mr Ellis notice of, or a copy of his demand made on ASPAC. …
Mr Ellis deposes that, had he known that Mr Church had advanced to ASPAC the overlapping sums as “cash injections”, for which he held ASPAC liable, Mr Ellis would not have acknowledged any indebtedness represented by those sums. Mr Ellis therefore counterclaims in this proceeding for the sum of
$371,896.15 …
[64] The Amand Trust demand on ASPAC came on 8 August 2021. There is no evidence Mr Church “held ASPAC liable for” the above sums prior to the 8 August 2021 demand. The Deed, while undated, was signed no later than early July 2021.
[65] Mr Ellis relies on s 9 of Fair Trading Act 1986. Mr Ellis’ argument is that everything that came before the 8 August 2021 Amand Trust demand was misleading. That is, Mr Church had in fact made disputed loans 2-6 directly to ASPAC and that the debtor/creditor relationship was Amand/ASPAC. Mr Ellis says this means he in fact had no personal liability for these amounts and was misled by Mr Church’s silence in that regard into signing The Deed and the Variation and engaging in the above correspondence. I do not accept this submission.
[66] In respect of the $111,000 — the fact that Mr Ellis drafted the Variation of 13 May 2021 (as he had the Original Deed debt from September 2018) confirms he requested this advance on the basis he would be liable for it. Nor can Mr Ellis’ submission survive the fact that he received “considered independent legal advice” in respect of The Deed which expressly refers to the $180,000. Nor can the submission be reconciled with Mr Ellis agreeing to the $70,000 being treated the same as the
$111,000 (incorrectly referred to as $110,000).
[67]Mr Ellis sought and understood each of the disputed advances (save for the
$120,000). Mr Ellis was not misled into The Deed or emails referred to in the recital of the disputed loans — the basis of those transactions was either explained to him, described in The Deed or emails, or included in sums set out in The Deed, upon which he took independent advice. Mr Ellis does not deny requesting the advances being to him but payable to ASPAC.
[68] The only matter Mr Ellis puts up to counter Mr Church’s position that the above sums were included in the 8 August 2021 demand in error is that Mr Church has not, on Mr Pyke’s reading of the Receivers’ Reports, adjusted the amount of his claim.
[69] I am satisfied Mr Church has established that Mr Ellis does not have an arguable defence based on the proposition that it is ASPAC that is liable for the above sums.
[70] This defence also relies on Mr Church being in trade in respect of the advances he made to Mr Ellis. “In trade” is defined under s 2(1) of the Fair Trading Act as:
Any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land.
[71] I accept the submission of Ms Jolliffe, counsel for Mr Church, that Mr Church was not in trade in respect of the advances in issue in this proceeding. This was private family lending between brothers-in-law. Mr Pyke submits the advances were made directly to ASPAC of which the Amand Trust was a substantial shareholder. However, the advances in issue in this proceeding were made by Mr Church. That Mr Church sourced the funds from his Trust is beside the point. Mr Church is not in the business of lending money. I note interest was not payable on the advances until September 2022. The informality of the advances, that the two initial Deeds (noted in the Background of The Deed above at [8]) were prepared by Mr Ellis without Mr Church taking independent advice, is consistent with these being family transactions. The fact that the $70,000 advance was made, it seems against legal advice as noted at [60] above, also points to these being family transactions.
[72] Mr Pyke submits that the recitals to The Deed, Mr Church’s own evidence that some of his advances were made to ASPAC, and the appointment of Receivers, are against this being “only family lending”. However, the 8 August 2021 demand was made by Mr Church as trustee of the Amand Trust and the Receivers were appointed by the trustees of the Amand Trust. Mr Church brings this claim in his personal capacity.
[73] I see nothing in the recitals to The Deed which point to Mr Church acting in trade. Nor does Mr Church’s error in including advances to Mr Ellis in the Amand Trust’s demand on ASPAC convert Mr Church into a financier. I do not accept that this is a matter for trial — the short point is, there is no evidence Mr Church is in trade as a financier.
[74] Mr Pyke submits that if this submission is not accepted, then Mr Ellis will amend his claim by framing it as a contractual misrepresentation. Reframing the claim as a contractual misrepresentation may address the “in trade” issue but not the fundamental issue that there was no misrepresentation.
An error in The Deed
[75] The outstanding amount in The Deed is $981,154.07. That amount is followed by the words “being the sum of the amount outstanding under the Original Debt Deed, the Deed of Variation and the Further Debt”. The definition of the Original Debt Deed in the background is set out at [8] above. However, it is common ground that in fact the $225,000 in the Original Debt Deed had been repaid by the time of The Deed. In addition to this amount being paid, Mr Pyke submits Mr Church has, in the loan ledgers provided, acknowledged a further payment of $210,000 paid on 16 October 2020. Mr Pyke submits the outstanding amount is confirmed by reference to the recitals in The Deed and that Mr Church is estopped from denying the recitals to The Deed.7 Mr Pyke submits that as Mr Church is seeking to recover debt based on The Deed, an estoppel arises.
[76] The difficulty with Mr Pyke’s submission is that for Mr Ellis to establish the error in The Deed, he must rely on evidence outside of The Deed. While Mr Ellis submits the use of external evidence demonstrates an error in The Deed, he asserts Mr Church nonetheless must be held to the four corners of The Deed and cannot use external evidence to confirm the total payable under The Deed is correct. I do not accept that submission.
7 National Westminster Finance Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 (CA) at 550.
[77] Counsel for Mr Church have responsibly acknowledged the error in The Deed, rather than attempting to artificially constrain Mr Ellis to the terms of the document. To establish the correctness of the amount outstanding Mr Church has produced the loan ledger, already referred to, which gives full credit for the payments relied on by Mr Ellis. Either both parties are confined to the terms of The Deed or both parties are free to refer to evidence to correct errors in The Deed.
[78]We come back to the fact that Mr Ellis does not dispute the accuracy of the
$981,154.07 recorded in The Deed save for the ways that I have addressed.
Is Mr Church entitled to interest?
[79] Neither The Deed or its predecessors obliged Mr Ellis to pay interest on the debt.
[80] The PLA Notices issued to the mortgagor expired on 9 September 2022. On 12 September 2022, Mr Church’s solicitor (Mr Gartshore) emailed Mr Ellis recording that the mortgagee’s power of sale had accrued. In that email, Mr Gartshore referred to his understanding that Mr Ellis, both in his personal capacity and on behalf of the mortgagor, had requested an extension of time to 30 September 2022 to remedy the default.
[81]Mr Gartshore made the following proposal to Mr Ellis:
Without prejudice to David Church’s rights in relation to the unremedied defaults, David Church is prepared to defer mortgagee sale action to 30 September 2022, provided that:
1.1. you confirm (by return email by 5pm on 13 September 2022) agreement by yourself (in your personal capacity) and Benhar Properties Limited that:
1.interest is payable by Brian Ellis on the “Outstanding Amount” (as that term is defined in the Deed of Confirmation). Such interest shall be at a rate of 6.5% per annum and capitalised monthly and shall be calculated as if it commenced being payable from the date of the Deed of Confirmation (ie backdated); and
(ii)Brian Ellis to make payment of:
1.Webb Henderson costs in relation to the lending documentation of
$4,588.50;
2.Property Law Centre invoice in relation to registration of mortgage agreed to be paid by the Borrower of
$612.50; and
3.all other reasonable legal and other costs of David Church or the Amand Trust incurred in relation to the Deed of Confirmation or the borrowing referred to therein (including enforcement of the same); and
2.2. you (or Benhar Properties Limited) make payment of the above amounts, together with the other “Outstanding Amount” (as that term is defined in the Deed of Confirmation) to David Church by 5pm on 30 September 2022.
[82] Mr Gartshore’s email gave until 5:00 pm the following day, 13 September 2022, to confirm agreement to the above terms, failing which the mortgagee sale process would be commenced.
[83] Apparently, no reply was received to that email because on 16 September 2022, Mr Gartshore emailed Mr Ellis providing him with a copy of a letter detailing the mortgagee sale process. Less than half an hour after receiving that email, Mr Ellis replied acknowledging receipt of the emails and advising he considered he was entitled to get independent advice and that he expected to have that by the following Tuesday, 16 September 2022, being a Friday (the email exchange just referred to, occurring in the early evening). Mr Ellis confirmed that subject to taking advice he was prepared to agree to the points raised but asked that he be given time to take considered legal advice. Mr Ellis asked if he could “have until Tuesday” to respond to avoid “matters getting out of hand”. Mr Gartshore advised that he would take instructions.
[84] On Monday 19 September 2022 at 5:15 pm, Mr Ellis replied to Mr Gartshore that he had spoken to Mr Church the day before, just after 9:00 am. Mr Ellis advised that Mr Church had said Mr Ellis had until 10:00 am on 19 September 2022 to agree
to the terms set out at [81] otherwise he would commence the mortgagee sale process. Mr Ellis’ reply at 5.15 pm is later than the 10:00 am deadline. However, Mr Ellis advised he had obtained independent legal advice and said: “On a without prejudice basis I agree with the changes he has requested”. Mr Ellis said:
In view of this, it is somewhat premature to have a valuer call to inspect 469 Seaview Road [the Waiheke property]. Please confirm any instructions he has been given to inspect the property have been withdrawn at this juncture. He sought approval to go onto the property and that has not been given at this time.
[85] Mr Church relies on this exchange to show that Mr Church agreed to the obligation to pay interest specified at para 1.1 of Mr Gartshore’s 12 September 2022 email set out at [81] above.
[86] Mr Ellis raises a number of grounds in opposition to the interest claim. Notwithstanding having sent his email of 5:15 pm on 19 September 2022, he in effect submits his email was of no effect as Mr Church’s offer was no longer capable of acceptance. This claim was not expressly raised in Mr Ellis’ opposition or affidavit. Mr Ellis also says Mr Church did not “defer the mortgagee sale action to 30 September 2022” being what Mr Church committed to do under his 12 September 2022 offer. Mr Ellis says that as a consequence if a contract came into existence he cancelled it for that breach, cancellation being advised in Mr Ellis’ affidavit filed in this proceeding dated 5 March 2024.
[87]Mr Ellis says:
I did not accept [Mr Church’s] offer. I replied “without prejudice” because my acceptance was conditional on Mr Church deferring the “mortgagee sale action”, which he did not commit to and did not do.
[88] I do not accept that Mr Ellis failed to accept the offer. His addition of the words “without prejudice” is not capable of preventing an agreement coming into existence. Mr Pyke did not submit that was the case. The passage from Mr Ellis’ 19 September 2022 email, at [84] above, records Mr Ellis requesting the valuer be called off. This shows Mr Ellis considered an agreement was in place. Mr Ellis cannot approbate and reprobate, that is he could not seek the benefit of the agreement and yet deny its existence.
[89] Mr Ellis certainly did not consider the offer incapable of acceptance given his acceptance email. Mr Church did not reply that it was too late to accept the offer. He held off commencing the sale process. Mr Ellis did not expressly put in issue in his opposition that his acceptance was out of time — if he had, Mr Church could have addressed it. Having not done so, it was not open to Mr Ellis to take the point only in submissions and in any event, the circumstances are against Mr Ellis’ “acceptance” being a nullity.
What is meant by deferring mortgagee sale action? — did Mr Church breach the agreement?
[90] The context of the offer of 12 September 2022 was that the power of mortgagee sale had accrued. The email then immediately refers to Mr Ellis requesting an extension of time to remedy the default and the proposed terms are set out.
[91] Mr Church acknowledges that prior to 30 September 2022, he obtained market appraisals and a valuation of the property so that he would be able to proceed if the PLA Notices were not remedied by 30 September 2022. Mr Church’s submission is that he committed to defer mortgagee sale action and he did not formally appoint an agent in respect of the sale of the property until 11 October 2022, that is 11 days after the agreed deferral date. Mr Church’s position is that until a property is listed on the market and advertised, there is no mortgagee sale under way, so there is no “mortgagee sale action” to defer. No marketing of the property took place prior to 30 September 2022.
[92]Mr Ellis, in his affidavit says:
David Church failed to perform his part of the bargain, in that he kept moving forward with “mortgagee sale action”, without delay: he did not perform his side of any bargain, which for the avoidance of doubt I now cancel, if an agreement is held ….. to have formed.
[93] Mr Ellis, in his affidavit, goes on to say: “This series of events is evidenced as follows” and he refers to correspondence and the fact that Mr Church proceeded with the mortgagee sale. The correspondence Mr Ellis refers to is a letter from his then solicitors to Mr Gartshore of 30 September 2022. That letter does not set out anything
that would be a breach of Mr Church’s commitments under the terms set out in Mr Gartshore’s email of 12 September 2022.
[94] Mr Ellis relies on para [50] of Mr Church’s affidavit as demonstrating that Mr Church did not perform his side of the bargain. He says: “Following expiry of the Second PLA Notices, I commenced mortgagee sale action in respect of the 469 Property”. The next paragraph in the affidavit refers to the marketing of that property commencing on 17 October 2022.
[95] The substance and intent of the proposal made by Mr Gartshore on 12 September 2022, was an extension of time to comply with the PLA Notices, that is a deferral of the power of sale being exercised. Mr Church did not take any steps to exercise the power of sale until 11 October 2022 when the real estate agent was instructed. Obtaining market appraisals or valuations is not “mortgagee sale action”, they are steps preparatory to a mortgagee sale.
[96] In any event, it is not clear on what basis Mr Ellis believes he could cancel the agreement.
[97] Even if I am incorrect that obtaining market research (appraisals/valuations) did not contravene the agreement, such would not amount to Mr Church making it clear he did not intend to perform his obligations under the contract, as the key obligation under the agreement was the deferral of the sale itself. Thus, s 36 of the Contract and Commercial Law Act 2017 would not be satisfied. Nor would s 37 of that Act be satisfied as Mr Ellis does not explain how market appraisal work substantially reduced the benefit of the contract to him or substantially increased the burden of the agreement to him. Nor is there any suggestion it was impliedly agreed there being no market appraisal work, was essential to Mr Ellis. Had that been the case and had the valuer persisted in seeking access to the property (and there is no evidence the valuation took place with access to the property), Mr Ellis no doubt would have complained.
[98] Further, even if my conclusion in the preceding paragraph is incorrect, Mr Ellis’ late cancellation would not assist him. Pursuant to the September 2022
contract, Mr Church has an accrued right to interest. The agreement provides interest is capitalised monthly. That entitlement continues to accrue until the date of purported cancellation. Accrued debts are not affected by subsequent cancellation.8
[99] Mr Ellis agreed to pay interest in exchange for the deferral of Mr Church exercising the power of sale. He received the benefit of that agreement, he cannot now deny the obligations he committed to in exchange for receiving that benefit.
[100] I find Mr Ellis is obliged to pay interest in terms of the 12 September 2022 email. Mr Pyke, in a footnote to his submissions, asserts the prayer for relief in the statement of claim does not satisfy s 25(1) of the Interest on Money Claims Act 2016. This point is not raised in the notice of opposition. Had it been, no doubt the claim would have been amended. A plaintiff seeking summary judgment is entitled to notice of the grounds of opposition in the document intended for that purpose, being the notice of opposition and not in a footnote to submissions. I would grant leave to amend the statement of claim to address this point if Mr Pyke maintains the point — no prejudice is suggested in the footnote —there is no suggestion that the claim for interest is not understood. Mr Pyke is to advise within three working days of receipt of this Judgment whether he requires the prayer for relief to be amended.
Disputed costs
[101] The ledger prepared by Mr Church includes claims for legal costs payable pursuant to the agreement reached in September 2022 to defer the mortgagee sale. Mr Ellis does not dispute the legal costs incurred in the mortgagee sale process itself.
[102] The terms of the September 2022 agreement set out at para [81], required Mr Ellis to pay specified costs as well as all further reasonable legal and other costs relating to The Deed and the borrowing, including enforcement.
[103] Mr Ellis, in his affidavit, took issue with costs totalling $21,921.92. Mr Ellis says the costs that make up this total are “not covered by the Deed of Confirmation”.
8 Brown v Langwoods Photo Stores [1991] 1 NZLR 173 (CA) at 176.
[104]The costs that make up the disputed figure are:
(a)Webb Henderson invoice of 17 December 2021 of $4,588.50;
(b)Webb Henderson invoice of 2 August 2022 of $1,541;
(c)Webb Henderson invoice of 20 October 2022 of $7,848.91; and
(d)Webb Henderson invoice of 5 December 2022 of $7,943.51.
[105] The $4,588.50 is dated on the ledger as 17 December 2021. Presumably that is the date of payment as $4,588.50 is the amount recorded in the September 2022 agreement as being payable by Mr Ellis. There is no other debit in the ledger for the same amount. I am satisfied Mr Ellis does not have a defence in respect of this claim as he accepted liability for this specific amount under the September 2022 agreement.
[106] The further amount for which Mr Ellis accepted liability for in the September 2022 agreement was $612.50 is shown on the ledger as dated 18 January 2022 which is again presumably the date of payment (this sum is not disputed by Mr Ellis).
[107] However, there is merit in Mr Ellis’ point that the remaining costs claims are not particularised nor are the invoices provided. They are presumably said to be payable pursuant to the terms of the September 2022 agreement. Mr Ellis’ affidavit specifically puts these costs in issue. While Mr Ellis says that even if they were proven they ought to have come out of the proceeds of sale of the property, that point would not reduce his liability as if they had been paid from the sale proceeds, that would simply increase the shortfall he owes following the mortgagee sale.
[108] Mr Church’s reply does not directly engage with this point. Mr Church refers to further legal costs he incurred with Anthony Harper on the mortgagee sale process, but those costs are not disputed by Mr Ellis. Given Mr Ellis’ objection, it was not enough for Mr Church simply to refer again to the ledger. The invoices in issue should have been produced so that it could be shown they were covered by the September 2022 agreement. While I accept this point was not specifically raised in
the notice of opposition, it is expressly raised by Mr Ellis in his affidavit, unlike other matters raised only in submission. Mr Church should have produced the invoices in question.
[109] Accordingly, I am satisfied Mr Church has not established that he is entitled to judgment in respect of the costs challenged by Mr Ellis save for the $4,588.50 for which liability was accepted in the September 2022 agreement.
[110] Accordingly, Mr Ellis’ challenge to the costs component of the claim against him, succeeds to the extent of $17,333.42. Mr Church has not met his onus in respect of that sum. Again, the spreadsheet prepared in respect of interest will need to be adjusted to exclude the amounts.
Orders
[111] I am satisfied that Mr Church is entitled to judgment. I order that Ms Jolliffe is to calculate the amount of the claim on the basis that Mr Church’s claim excludes the $120,000 and the disallowed costs. I make this order as the basic amount claimed in the statement of claim includes the $120,000 and costs along with interest on both. Ms Jolliffe is to also file a memorandum with the usual detail in support of the claim for costs under The Deed in respect of this proceeding.
Associate Judge Lester
Solicitors:
Anthony Harper, Christchurch (for Plaintiff)Christopher Taylor Lawyers, Auckland (for Defendant)
Copy to counsel:
W C Pyke, Barrister, Auckland (for Defendant)
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