Clydesdale v Clydesdale

[2019] NZHC 399

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2018-412-54

[2019] NZHC 399

BETWEEN

STEPHEN JOHN CLYDESDALE and DENISE MARIE CLYDESDALE
Plaintiffs

AND

GRAEME KENNETH CLYDESDALE

Defendant

Hearing:	(Determined on the Papers)
Counsel:	L A Andersen for Plaintiffs N M Laws for Defendant
Judgment:	12 March 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(as to costs)

[1]        This dispute arises from an unfortunate breakdown in the relationship between two brothers.

[2]        The plaintiffs issued summary judgment proceedings against the defendant on 4 July 2018. The proceedings were served on 10 July 2018. The proceeding settled only after papers in opposition were filed along with an affidavit in reply from the plaintiffs. The proceeding was discontinued leaving costs to be determined.

[3]        Stephen Clydesdale (“Stephen”) and his wife Denise Clydesdale, are trustees of a bare trust pursuant to a Trust Deed dated 13 March 2013 under which they held a property at 13 McDonald Street, Mosgiel (“McDonald St”) for his mother Winifred Lorraine Ashton and her husband Robert Ashton, who is Stephen’s step-father.

CLYDESDALE v CLYDESDALE [2019] NZHC 399 [12 March 2019].

[4]        In his affidavit, Stephen recounts that funds were borrowed against the security of McDonald St from ANZ, he says with his mother’s permission. He says that the funds were borrowed at the request of the defendant, Graeme Clydesdale (“Graeme”) and then loaned by the plaintiffs to Graeme.

[5]        Accordingly, Stephen’s case is that he and his wife are the borrowers of funds from ANZ with those funds secured by a mortgage over McDonald St, but that the advance was arranged with the permission of the beneficial owner of the property being the parties’ mother, with Graeme being the ultimate recipient of the funds.

[6]        In effect, the loan was being made by Stephen and Graeme’s mother with the plaintiffs being a conduit of the loan given that they were on the title to McDonald St. Graeme was to cover the repayments to ANZ and the transaction was on the basis that the plaintiffs would not be out of pocket.

[7]        It is not in dispute that funds were made available, but Graeme raises an issue as to whether the advance was entirely from the parties’ mother or partly from their mother and partly from the plaintiffs.

[8]        Irrespective of who is treated as the lender, it is common ground that Graeme did make repayments to ANZ and did so from the date of the earliest advance in December 2016.

[9]        Unfortunately, the parties’ mother died on 21 December 2017 and that appears to have signalled, if not a breakdown in the parties’ relationship, then certainly         a worsening.

[10]      Stephen in his affidavit says that Graeme’s attitude to continuing to make the repayments changed following the death of their mother. Stephen says that Graeme breached the agreement by refusing to continue making the loan repayments direct to ANZ, whereas Graeme asserts that Stephen agreed to him stopping the repayments after January 2018.

[11]      In support of Stephen’s position, he produces a text exchange with Graeme. That the text was sent is not disputed. In that text, Graeme says:

Finally, my loan of 90k will change after the reading of the will. I will take [off] what I believe the inheritance is and pay the balance only to force a resolution in this matter.

[12]      The tone and the other content of the text message reflects a deep disagreement between Stephen and Graeme. Even in his affidavit in reply, Graeme says that he thinks his brother is trying to cheat their sisters out of any inheritance.

[13]      Given the vehement tone of the text message and the nature of the allegations, it seems unlikely that Stephen then agreed to Graeme not making the loan payments when the loan still had to be serviced. As Stephen says at his affidavit:

After the Defendant stopped making payments in January 2018, my wife and I have had to meet our obligations to the ANZ in respect of repayment of the Defendant’s loans. We have made the following payments totalling $2,098.13

…:

(a) 1 February 2018 $161.39;

(b) 1 March 2018 $451.90;

(c) 1 April 2018 $500.33;

(d)       1 May 2018 $484.18;

(e)        8 May 2018 $500.33.

[14]      Graeme accepts he did not make the monthly payments from February 2018 to May 2018 (inclusive), but again says that his brother agreed with him that he need not do so.

[15]      This raises a credibility issue which cannot be determined, but again it seems inherently unlikely, given the tone and content of the text message, the state of the relationship between the parties and the fact that the loan repayments had to be paid (by the plaintiffs) come what may, that the plaintiffs would have agreed to release Graeme from his repayment obligations which he had been honouring for some time.

[16]      Graeme’s position is that based on his evidence that it was agreed that he need not make the payments, he was not in default of the agreed arrangements. He says

that full repayment was not demanded before these proceedings were issued and that had he been asked to refinance the loans he would have done so. He says that the proceedings were unnecessary.

[17]      Following the issue of the proceedings, Graeme arranged to repay the bulk of the advance to ANZ. That initial repayment left a few thousand dollars unpaid which has now been resolved.

[18]      Accordingly, the plaintiffs’ application for summary judgment was not pursued and the proceedings were discontinued, subject to the Court dealing with costs.

[19]      The parties have filed memoranda, each seeking costs. In summary, the plaintiffs  seek  costs  notwithstanding  the  discontinuance  saying  that  in  effect  the proceedings were successful as they achieved what they sought to achieve, that is the repayment of the advance, albeit it was repaid directly to ANZ.

[20]      Graeme opposes that application and seeks costs himself, primarily on the grounds that the proceedings were issued without any prior request or demand from the plaintiffs for repayment. Graeme says that the first he knew of the loan being called up was when he received the High Court proceedings.

[21]      The plaintiffs have filed a memorandum in reply to Graeme’s costs memorandum and it does not take issue with the submission that there was no request or demand by the plaintiffs for the repayment before the proceedings were issued.

[22]      The plaintiffs suggest that Graeme was formally notified of the proceedings through an affidavit in another proceeding. Graeme has affirmed that he was not aware of the prospect of this proceeding prior to it being served upon him and he did not receive a copy of, nor read the affidavit in the other proceeding that referred to the possibility of proceedings.

Discussion

[23]      The default rule is a plaintiff who discontinues is liable for costs,1 but that is subject to the general rule that costs are at the discretion of the Court.2 The plaintiffs say they were in substance successful so that costs should follow the event. The Court can consider the reasonableness of the parties’ actions and the litigation history as    a whole.3

[24]      The affidavits show the extent to which the relationship between Stephen and Graeme has broken down. On the one hand, the brothers’ strained relationship around December 2017 makes it inherently unlikely that the plaintiffs would have agreed with Graeme stopping payments when that agreement would mean the plaintiffs would have to meet the repayment obligations to ANZ for no apparent benefit. This position is reinforced by the length of time resolution of issues relating to their mother’s estate was going to take.

[25]      Equally, it is not disputed that the proceedings were issued without the outstanding amount being demanded or there being a call for repayment. Had there been such a request for repayment or to refinance then Graeme says he would have refinanced the debt – which is what he did when served.

[26]      I note the statement of claim does not contain the usual recital of demand being made, nor does the original affidavit in support of the application for summary judgment assert that demand was made.

[27]      The loan should have been formally called up before High Court proceedings were issued. Indeed, there is merit in Graeme’s point that the amount in issue is well within the District Court jurisdiction.

[28]      Graeme must have known the advance would have to be dealt with. He could have taken the lead on refinancing and indeed, given the state of the relationship with his brother and the dispute about the Estate, he probably should have done so.

1      High Court Rules 2016, r 15.23.

2      High Court Rules 2016, r 14.1(1).

3      Kroma Colour Prints Ltd v Tridomicato NZ Ltd [2008] NZCA 150, (2008) 18 PRZ 973.

[29]      I consider that the merits, or lack of merit, is equal and in those circumstances, I consider there should be no order as to costs either way.

[30]Accordingly, the application for costs by each party is dismissed.

Associate Judge Lester

Solicitors:

Albert Alloo & Sons, Dunedin

Copy to counsel: L A Andersen, Barrister, Dunedin
Ross Dowling Marquet Griffin, Dunedin