Clark v Kitching HC Wellington CIV-2004-485-2199

[2005] NZHC 1660

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2004-485-2199

IN THE MATTER OF

an Appeal under the District Courts Act 1947

BETWEEN

KENNETH ROBERT CLARK

Appellant

AND

LARAINE ROBYN KITCHING, WAYNE TREVOR CAMPBELL KITCHING AND SUZANNE LARAINE VINTINER AS TRUSTEES OF THE W & L KITCHING FAMILY TRUST

Respondents

Hearing:

23 March 2005

Appearances: J Rennie for Appellant

A Holloway for Respondents Judgment:  4 April 2005

In accordance with r540(4) I direct the Registrar to endorse this judgment with the delivery time of 12.30pm on the 4^th day of April 2005.

RESERVED JUDGMENT OF GENDALL J

[1]    This is an appeal against a summary judgment entered in the District Court at Upper Hutt, after a defended hearing, on 16 September 2004. Judgment was in the sum of $20,000 together with costs, interest and disbursements of $3,243.69.

[2]    The respondents (“the Kitching Trust”) claimed against the appellant (“Clark”) $20,000 based upon an on-demand loan made to him, which he had failed to repay.  There were causes of action under the Contractual Mistakes Act 1977 and

in respect of money had and received and restitution, but as the District Court Judge

KENNETH ROBERT CLARK V LARAINE ROBYN KITCHING, WAYNE TREVOR CAMPBELL KITCHING AND SUZANNE LARAINE VINTINER AS TRUSTEES OF THE W & L KITCHING FAMILY TRUST HC WN CIV-2004-485-2199 [4 April 2005]

correctly observed, the claim was really based upon contract. Consideration clearly existed and he amended the statement of claim to comprise a cause of action for breach of contract to repay loan monies. He was correct in his assessment that there was no prejudice to the plaintiffs and no issue was taken of that on appeal.

[3]    The Kitching Trust’s case was that Clark was the accountant for the Trust, and the Kitching family from 1975 until 2002. He was also one of the three trustees of the Trust in November 1996. At that time there was advanced to him the sum of

$20,000 from the Trust bank account. It was pleaded that he wished to use this for his personal investment in a restaurant (Cobb & Co) business in Lower Hutt. There was paid, from the Trust bank account, $20,000 on 19 November 1996. Demands  for repayment of the loan were made on six occasions between 30 November 1998 and 16 April 2004. No written or other response was forthcoming.

[4]    Mr Clark’s defence to the summary judgment application or his contention, was that:

“1. The alleged loan was an investment for which [Clark] was a conduit.

2.There was no agreement between the [trustees] and [Clark] for the loan of a sum of money.

3.One of the [trustees] is personally liable to [Clark] for a sum in excess of the figure claimed.”

[5]    An affidavit was filed by Mr Clark in which he generally asserted that he was not interested himself in investing in the restaurant business. He said he had informed Mr Kitching one of the trustees, of a scheme which required an investment of $20,000; no mention was made of a loan to him and that although he was trustee of the Trust at the time of the payment he was not consulted in his capacity about that; he says his position as trustee was that he would have advised against the Trust outlaying the amount; he then said that:

“I understood from discussions with Mr Kitching that the $20,000.00 was to be used to invest in the Cobb & Co venture. I then invested the money and shares were issued for Mr and Mrs Kitching. Unfortunately, that venture  was not a success and the $20,000.00 was lost. That is, the shares became of nil value. However, I never agreed that I would be responsible for repaying the investment sum put into the…venture through me.”

The judgment under appeal

[6]    Mr Clark was served with the proceedings on 18 June 2004.  When they  came on for hearing two months later on 2 August 2004 he had filed his only affidavit in support of his opposition.  Judge Behrens adjourned  the  matter  until   30 August 2004 directing Mr Clark to file any additional affidavit by 9 August 2004. This was not done. Eventually the matter came before Judge Tuohy for hearing on  16 September 2004. Mr Clark still had not filed any further affidavit.  Counsel on  his behalf sought a further adjournment but that  was declined on the basis that     Mr Clark had ample time (over three months) to file any affidavits to support his assertions.

[7]In his judgment the Judge outlines the facts not in dispute, namely that

$20,000 was paid by the Trust to Clark who asserted that the payment was simply  for him to invest on behalf of the Trust in a project and it had been lost. The Trust maintained it was a non-demand loan.

[8]    The Judge observed that although there might appear to be a dispute of fact, it is not sufficient in summary judgment cases for a defendant simply to make a bald assertion and any factual dispute must reach “the threshold of credibility”. The  Judge then went on to say:

“[21]  Here Mr Clark was the accountant to this trust.   He  was in  practice as an accountant at the time. He ought to be able to show in a number of different ways, by contemporary documentation, that his assertion is true.  He ought to be able to show the money trail…a payment from his trust account to this project in the names of the Kitching Trust or the Kitchings. He ought to be able to point to some company documentation relating to the Cobb & Co, whatever it was, showing the allocation or transfer to the Kitching Trust of some shares in that company. He ought to be able to point to company office returns showing them as shareholders at some stage. He ought to be able to point to company accounts showing them as investors in the project. He ought to be able to point to letters to them relating to their investment. Despite the amount of time he has had to provide any material  of that nature he has provided none.

[22]      In my view his assertion that this payment was not a loan to him personally does not reach the threshold of credibility.

[23]      Mr Kitching has shown the payment being made. He has deposed that it was a loan. If it was not and it was an investment then in these particular circumstances Mr Clark ought to be able to show that.”

[9]    The Judge then went on to observe that the onus of proof on summary judgment was on the plaintiff to show that there was no arguable defence but in these particular circumstances it was within Clark’s power to provide some sort of information or contemporary documentation which would back up his contradiction of the trustees’ evidence. The Judge said that none was provided and he  was satisfied there was no arguable defence and summary judgment was entered.

Counsel’s submissions

[10]   Counsel for the appellant contended the Judge was wrong to find that Clark’s assertions did not reach the threshold of credibility. She submitted that there were disputed issues of fact that required to be determined at a trial. She said that it was not established that the trustees themselves were authorised by the Trust to transfer the money and therefore the Trust had no legalised standing to obtain judgment against Clark. She further contended that the Judge erred in what was said to be “reversing the onus of proof”. She said that as Mr Clark’s accounting practice had been sold he was inhibited or hampered in providing contemporary documentation to contradict the trustees’ evidence.

[11]   Much of the argument presented revolved around the contention that the advance to Mr Clark was personal to the Kitchings, and not by the Trust, and therefore the trustees are acting ultra vires their powers under the Trust. That point does not appear to have been argued before the District Court Judge. In any event I cannot see how that would assist the appellant. All that would have followed would be the amendment or substitution of the Kitchings as the plaintiffs. It is of no avail for the appellant to say that the Kitchings should have sued in their personal capacity because the issue, or his claimed defence, is whether a loan was made to him or whether the Kitchings, whether as trustees or individually, were investing in a business or company. In addition, the District Court Judge may have acted under RR11 and 103 of the District Court Rules concerning misjoinder of parties or the adding or subtracting parties under its wide discretion. The fact remains however, that payment was evidenced as having come from the Trust’s bank account and paid to Clark. It was not open to him to dispute liability to repay on the basis that the advance was made in the Kitchings’ personal rather than representative capacity.

The Kitchings are primary beneficiaries, as well as trustees. The essential feature of the cause of action was not the identity of the “lender” but whether there was in fact a loan made, or on the other hand, an advance for investment on the part of the Trust or the Kitchings.

[12]   It is well known that a defendant is required to state clearly what the defence is and on the grounds upon which it is based with the extent of particularity depending upon the circumstances. But a denial of liability in general terms is not acceptable particularly where documentary evidence supporting the defence, which must exist if the defence is tenable, should be included: Treeways 2000 Ltd v Ryan (1995) 8 PRNZ 398 (CA). That is particularly important where the facts of the defence are within the knowledge of the defendant and although onus is upon a plaintiff a defendant has to provide some evidential foundation for the defence which is raised. The approach is that, well understood since Pemberton v Chappell [1987] 1 NZLR 1 (CA), that a defendant must file an affidavit raising an issue of fact or law and give reasonable particulars of matters which he claims ought to be put in issue.

[13]   Where a question of fact is in dispute, upon which the outcome of the case may turn, it will often not be right to enter summary judgment but there may be cases where a Court can be confident, that is satisfied, that a defendant’s statements as to matters of fact are baseless. There is a need to scrutinise affidavits to see that they pass the threshold of credibility to see whether there is any arguable defence. An approach which has been adopted is that discussed in Meng Mee Yong v Letchumanan [1980] AC 331 (PC) where Lord Diplock in delivering the judgment of the Court said, at p341:

“Although in the normal way it is not appropriate for a Judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement of an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be….The Judge is vested with a discretion which he must exercise judicially. It is for him to determine in the first instance whether statements contained in affidavits that are relied upon as raising a conflict of evidence upon a relevant fact has sufficient prima facie plausibility to merit further investigation as to their truth.”

[14]   That approach has been endorsed by the Court of Appeal in AGC (NZ) Ltd v McBeth [1992] 3 NZLR 54 at pp58-59:

“The summary judgment procedure is a simple expeditious way to enable a plaintiff to obtain judgment where there is no real defence to the claim made: see Pemberton v Chappell [1978] 1 NZLR 1 at p2. The essence of the procedure is the plaintiff’s own verification by affidavit of his own statement of claim and the allegations made in it: Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21. There has to be a balancing between the right of the defendant to have his day in Court and to have his proper defences explored and the appropriate robust and realistic approach called for by the particular facts of the case: see Bilby Dimock Corporation Ltd v Patel (1987) 1 PRNZ 84 and Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd [1990] 2 NZLR 308 at p313. Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff’s verification stands unchallenged and ought to be accepted unless is it patently wrong.”

[15]   In the present case the District Court Judge undertook that exercise, pertinently observing that as the accountant for the Kitchings, the restaurant business and the Trust, Clark could well have been able to show through documentation that his claim – that is that he was simply acting as an accountant and making investments on behalf of a client – was true. The Judge was well satisfied that there was no tenable defence disclosed in the affidavits.

[16]   It was submitted by counsel on Clark’s behalf that his accountancy practice was sold in July 2001 and that may explain his difficulty in obtaining records, bank statements and the like. But Clark remained a debenture holder as a creditor of the company, and he and its two shareholders placed it into receivership on 14 May 2002. Furthermore, he received correspondence on 30 November 1998,  8 April 2001, 25 November 2002, 17 September 2003 and 16 April 2004, all of which requested repayment of the loan and which surely called for an answer if the position was as now claimed by him. Trust account records, journal entries (for clients such as the Kitchings and the Company) practice bank accounts would still be available. Beyond  doubt  a  cheque  for  $20,000  was  paid  to,  and  banked  by  him  on     19 November 1996.

[17]   All the documents produced to the District Court Judge were by the  Kitchings and they pointed to or supported their contentions. There was no evidence

that they, whether personally or as trustees, had been allotted shares in the restaurant company as claimed by Clark. On appeal counsel suggested that it may be that the company, in respect of which shares were allocated, was different to that referred to in the affidavits. That submission carries only hope, but no conviction. It is abundantly clear that the company that Mr Clark was speaking about when referring to the Cobb & Co business was the company in which he and the two shareholders were debenture holders in their own names.  The two equal shareholders were not  the Kitchings, and nor were they issued shares in it. It is that company which was placed into receivership and that company, according to the receiver’s first report which was “incorporated in 1996 to obtain the franchise of a Cobb & Co licensed restaurant”.

[18]   Mr Clark was accountant for that company with its address for service or registered office and it was well within his knowledge facts of the company’s shareholding indebtedness and records, if the facts that he claimed to exist in fact existed. As  I have said he was a creditor of the company by debenture granted on  16 July 1996. How that came about he does not say. But it must mean he either invested in or advanced money to the company himself, or was a creditor through some other means. It was he and the two shareholders who placed the company into receivership pursuant to such debenture.

[19]   Counsel for Clark submitted that if the transaction had been one of a loan then there would surely have existed some documentary evidence of that, and it was an unlikely situation for there to be no document referring to term or interest. But  the same comment could equally be made if the transaction was to be one of an investment given that it was being made, so it is said, through the agency of the accountant acting for the Kitchings. The fact is that the parties were friends and the Kitchings did not seek to document the on-demand loan that they contend they made. What is clear is that they were demanding repayment of it within two years by 30 November 1998. The absence of the written document evidencing the loan is no more than a neutral factor, as clearly there was payment made to the accountant Clark and claims for it to be repaid made well before (nearly four years) the company was placed into receivership.

[20]   Counsel’s contention now that the Trust was not authorised to advance the money is no more than an assertion and in any event does not avail Mr Clark. The issue is whether there was advanced money from the Trust or the Kitchings to him which is clear that there was. In his notice of opposition in the District Court he did not make an assertion that the Trust was not authorised to advance that money, although obliquely there is that suggestion because he deposes that he did not seek to borrow funds and was not aware that the Trust was making the $20,000 advance.  But he goes on to say that if it was then he would have advised against the Trust outlaying such a sum on debenture. In any event the issue on the summary judgment application was whether there was a loan repayable on-demand to the Kitchings, whether as in their representative or personal capacity and that capacity is largely irrelevant given that they are the beneficiaries of the Trust.

[21]Critically, however, Mr Clark deposed that:

“I then invested the money and shares were issued for Mr and Mrs Kitching.”

As I have said there is no evidence that any such shares were issued or allotted. The company records produced by the Kitchings provide no support for such a contention and indeed make it clear, as I have said, that Mr Clark himself was a creditor or invested funds, despite him saying in his affidavit that he was not then investing. It may be of course that he did not invest, but how he became a creditor with the security or benefit of the debenture, is not explained. The debenture holders were himself, together with the two equal shareholders in the company.

[22]   The Judge did not reverse the onus of proof but simply emphasised the common sense view that an evidential onus obviously had to pass to Mr Clark to demonstrate a tenable defence so as to warrant or merit investigation as to his claims. I bear in mind that the appeal  is  against  the  exercise  of  a  discretion  by  a  District Court Judge. But I myself have reviewed and analysed the affidavit  evidence that was before him and I am well satisfied that the Judge was entitled to come to the view he did, namely that the assertions made by Mr Clark were no more than that and it did not constitute an arguable or credible defence that ought to be tested at a later trial. A simple bald denial of liability, in the circumstances of this

case, and in the absence of documentary or other evidence which must have been available or accessible to Mr Clark made the denial inherently improbable. The Judge was correct in his conclusion that the simple denial of liability was insufficient to withstand the summary judgment application and he was entitled in the exercise of his discretion to enter summary judgment.

[23]   It  follows  the  appeal is dismissed.    The respondents are entitled to costs which are fixed on a Category 2B basis.

………………………………

J W Gendall J

Solicitors:

Rainey Collins, Lawyers, Wellington for Appellant Phillips Fox, Solicitors, Wellington for Respondents