Commercial Finance and Securities Limited v Boaden
[2014] NZHC 1236
•6 June 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2008-404-000522 [2014] NZHC 1236
BETWEEN COMMERCIAL FINANCE AND
SECURITIES LIMITED Plaintiff/Respondent
AND
STUART BRUCE BOADEN Defendant/Applicant
Hearing: 3 June 2014 Appearances:
V Fletcher for the Plaintiff/Respondent
D Hayes for the Defendant/ApplicantJudgment:
6 June 2014
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
06.06.14 at 3:00pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
COMMERCIAL FINANCE AND SECURITIES LIMITED v S B BOADEN [2014] NZHC 1236 [4 June 2014]
[1] Mr Boaden applies to set aside the judgment obtained against him on 30 July
2008. The claim made against him was in connection with his guarantee of a loan facility granted to Neil Timber Limited (NTL) in respect of a $200,000 credit facility granted on or about 29 May 2007. In addition a $35,500 advance made in September 2007 was added to the total amount claimed to be owing.
[2] Mr Boaden deposed that he shifted to Australia in late 2007. The claim against him was not filed until January 2008. He said he had no knowledge of the claim or the judgment against him until he received a letter from an Australian law firm just before Christmas 2012.
[3] Since, he has had considerable correspondent with lawyers representing the respondent (CFSL).
[4] It is apparent from the Court file that difficulties were experienced with service of the claim upon Mr Boaden in 2008. Eventually substituted service was authorised by serving the claim documents in a sealed envelope on Mr John Edwards of North Shore Auckland.
[5] On 30 July 2008 judgment against Mr Boaden was obtained by default in the sum of $328,186.40, inclusive of interest and costs.
[6] On 10 May 2013 a bankruptcy notice issued claiming an amount of
$439,153.69 inclusive of interest that had accumulated since the date of judgment.
[7] At that time leave was sought to serve the proceeding on Mr Boaden outside New Zealand. In support of that application Mr Haydon, a director of CFSL attached a copy of a report from service agents recording an interview with Mr Edwards on 8 May 2008 who said Mr Boaden was a good friend who lived on the Gold Coast in Australia. The report noted that when asked Mr Edwards refused to provide any contact details for Mr Boaden, but stated he was happy to accept service of any documents on his behalf provided those were in a sealed envelope.
(a) Enforcement proceedings had not previously been issued because it was believed Mr Boaden did not have any assets.
(b)Recently he became aware of certain steps he said Mr Boaden had taken prior to leaving New Zealand for Australia which suggested there could be some if not full recovery for CFSL.
(c) He believes assets owned by Mr Boaden were transferred to related parties either at an undervalue or for no consideration at all, with a view to defeating his creditors.
(d)That in 2007 Mr Boaden was a director of UKANZ Properties Limited (UKANZ) which owned three properties at Glen Eden, Auckland whose current CV value is $1,195,000.
(e) In 2007 Mr Boaden was one of three directors of UKANZ. At the end of 2007 the position changed. The directors are Mr G F Boaden and Maria Edwards, and the sole shareholder is Boaden Properties Limited. G F Boaden is Mr Boaden’s brother. Maria Edwards is the wife of Mr John Evans upon whom the Court had authorised substituted service of CFSL’s claim. In 2007 Mr Boaden was the sole director of Boaden Properties and he and his wife and his brother (G F Boaden) were the shareholders. Presently Maria Edwards is now the sole director and shareholder.
(f) The recent annual returns of Boaden Properties have been filed by Mr
Boaden from Australia.
[9] Mr Boaden’s position, identified by his affidavit in support of his application to set aside judgment, is that he believes CFSL was not entitled to judgment. He says he was operating NTL which company’s main interest was manufacturing and installing commercial joinery. He said a Mr John Ede wanted to be involved with
the business and eventually to buy the company but at that time he was a bankrupt. He said Mr Ede referred him to people he knew namely CFSL and said they could provide funding to the company. A $200,000 loan facility was negotiated and Mr Boaden signed on behalf of the company and as guarantor. He said Mr Ede also signed as guarantor but that his guarantee only applied after 25 June 2007, the date by which Mr Ede was to be discharged from bankruptcy. Mr Boaden said Mr Ede signed as guarantor because was going to be purchasing the business when he was discharged from bankruptcy.
[10] Mr Boaden says that after signing the loan facility documents the company never received any part of the facility, that a request for drawdown was never made. Mr Boaden says it appears Mr Ede somehow persuaded CFSL to pay all the proceeds of the loan into a separate company named Neil Timber Trustees Company Limited (NTTCL), which Mr Ede controlled. Mr Boaden says that at the date of drawdown Mr Ede’s mother Dorothy was a director of NTTCL and subsequently from 21
August 2007 she was replaced by Arthur Ede, John Ede’s brother. Mr Boaden says that John Ede has recently been convicted of fraud and sent to prison, in part for misappropriating the money NTL was supposed to have received.
[11] Mr Boaden says he neither gave permission for nor, did he request that the proceeds of the loan be paid or be paid into someone else’s bank account. He has requested information from CFSL including documentation containing instructions to them to pay someone other than NTL. He says he has not received a response.
[12] Mr Boaden says CFSL was well aware at the time of the transaction that John Ede was still a bankrupt. He believes that Mr Ede convinced CFSL that he, Mr Boaden owned the property from which NTL operated. Mr Boaden believes there was a close relationship between John Ede and CFSL. He believes John Ede was conducting various frauds against CFSL. He gave evidence in the recent fraud criminal prosecutions brought against John Ede. Mr Ede represented himself in that criminal prosecution. Mr Boaden says Mr Ede asked him, Mr Boaden as a witness, whether he knew if he had repaid the loan money to the respondent. Mr Boaden responded that he did not know but he now recalls having been told by Mr Ede of
weekly meetings held by him with CFSL to settle their account. Mr Ede implied that property deals were involved in these discussions.
[13] Mr Boaden believes a prudent financier would not have paid the money out until, at the very least, a written authority was provided by the borrower. He believes CFSL has caused its own loss.
CFSL’s case
[14] In his affidavit in response Mr Haydon describes the relationship between NTL and CFSL as dating back to about 2005 and well prior to the relevant loan agreement and guarantee that was entered into May 2007. He said CFSL provided financial assistance to NTL from time to time as required by way of the discounting of specific invoices. He said CFSL dealt with both Mr Boaden and Mr John Ede during this period; that Mr Ede was employed by NTL as its sales manager. Mr Haydon was aware at that time that Mr Ede was a bankrupt.
[15] Mr Haydon says Mr Ede was held out by NTL and Mr Boaden as having proper authority to deal with CFSL on behalf of NTL. Correspondence between the parties and even signed documentation recorded Mr Ede’s position as the “contact person” for NTL. Mr Haydon believed Mr Ede was responsible for the day to day management of NTL; that pursuant to this authority Mr Ede regularly provided written instructions as to which bank accounts the funds advanced by CFSL should be deposited. Those instructions often included that advances be split into separate amounts to be deposited into different bank accounts. Statements recording the dates and amounts of funds involved were sent to NTL’s postal address and that CFSL continued doing business with NTL in this way throughout 2006 and into 2007.
[16] In May 2007 CFSL was contacted by NTL in respect of an advance of funds on terms different to the standard assignment arrangements. Mr Haydon says Messrs Boaden and Ede requested a loan of $200,000 which included an advance of certain funds prior to the formal loan and security documentation being finalised and executed. Mr Haydon distinctly recalls advising Messrs Boaden and Ede that the loan they had requested was a quite different financial arrangement to the previous
dealings and that he recalls making it clear that a personal guarantee would be required and that in the event of default CFSL would hold Mr Boaden liable for the full amount of the debt pursuant to the guarantee.
[17] The loan agreement was signed by Messrs Boaden and Ede. Regarding Mr Boaden’s claim that he cannot recall ever asking for a drawdown, Mr Haydon comments that that could not be correct because Mr Boaden was present when the loan, including the priority advances of $26,000, was requested. Mr Haydon says the balance of the loan monies were advanced on 29 May 2007 the day that the loan and security documents were signed. A sum of $40,000 was paid by way of cheque made payable to NTL and the sum of $131,312.57 was paid to NTL by direct credit.
[18] Mr Haydon explains that as a result of the passage of time CFSL does not now have in its possession any documents recording any drawdown instructions from NTL. He says that all advances would have been made in accordance with the express instructions from NTL. He notes that all aspects of the advances, the prior payments of $26,000 and the sum of $131,312.57 were all made to the same bank account. As proof of this Mr Haydon has annexed a copy of a facsimile from Mr Ede to him requesting funds be deposited into:
Neil Timber Trust Account
[ ]
[19] As Mr Haydon notes those instructions issued on NTL’s letterhead.
[20] Mr Haydon comments that whilst Mr Boaden attempts to distance himself from the company called Neil Timber Trustee Company Limited, Mr Haydon in fact believes Mr Boaden was closely connected with that company. He annexes a copy of a signed general security and a loan agreement dated 21 August 2007 between Neil Timber Trustee Company Limited and CFSL which records a loan of $304,700 secured by, amongst other things, a covenant and a guarantor from Mr Boaden. Mr Haydon also attaches a copy of a deed of subordination and priority which is signed by a Mr Boaden as second secured party. Also attached was a copy of a letter of offer from CFSL dated 19 July 2007 which Mr Boaden has signed as accepting the offer on behalf of NTTCL in his capacity as guarantor.
[21] Mr Haydon believes there are parts of Mr Boaden’s affidavit which are
simply incorrect.
[22] In his reply affidavit Mr Boaden says that he does not believe he authorised an additional sum of $35,500 being added to the basic $200,000 loan on September
2007; that it was not until Mr Boaden completed an audit in October 2007 that he became aware of the existence of the $35,500 which was paid to Mr Ede’s NTTCL account. He says that if there were express instructions from NTL with respect to this payment then he would have thought those would have been provided by Mr Haydon’s affidavit.
[23] Mr Boaden is critical of Mr Haydon’s response to a request that documents be provided showing proper authorisation to make the payments. Mr Boaden speculates that there were such documents and he is critical of Mr Haydon’s response that those are no longer available. This notwithstanding he notes Mr Haydon was able to supply a copy of a 2007 document relating to the application by Mr Ede for funding for NTTCL in which Mr Boaden has described as guarantor because the loan arrangement referred to in that did not transpire. Also he notes that Mr Haydon was able to provide copies of documents relating to transactions in 2005 and 2006. He assumes had there been drawdown instructions for the 2007 transactions that such would still be available.
[24] Mr Boaden believes there was a close relationship between Mr Ede and CFSL. He exhibits a copy of a cheque signed by Mr Haydon for money destined for NTL but which was made out as a cash cheque that, Mr Boaden says was subsequently misapplied by Mr Ede. He comments that Mr Haydon asserts that he had been instructed on previous occasions to pay factored money into different accounts and therefore he was justified in continuing that practice with respect to the loan payments. Mr Haydon says he had no particular knowledge of that practice having occurred. Mr Boaden is critical of Mr Haydon’s claims of having paid money to the wrong account on the instructions of NTL. He said that when the factoring arrangements were set up he, as director of NTL, had to nominate in writing who would have authority to batch invoices to be factored. He recalls that he, Mr Ede and Mr Ede’s mother were nominated and that along with these
nominations bank deposit slips were requested by CSFL and were provided as a means to instruct CFSL where factored monies were to be deposited. Mr Boaden said that he provided the correct ANZ bank deposit slips, he being the only person with authority to do so. Besides, and as Mr Haydon acknowledges, the loan in question was a “quite different financial arrangement to the factoring facilities and in respect of which Mr Ede was never given authority to give instructions to have the factored payments paid into other accounts of his choosing, with one exception, when Mr Boaden personally authorised by facsimile an authority to Mr Ede.
[25] Mr Boaden considers it irresponsible for CFSL who acted on Mr Ede’s requests to transfer funds due to NTL, to Mr Ede’s and his accounts. Indeed Mr Boaden believes those actions were a primary factor in NTL having to be liquidated. Mr Boaden believes that CFSL was the victim of Mr Ede’s fraud in that they were tricked into paying funds to the wrong account.
[26] Although Mr Haydon suggests Mr Boaden was present with Mr Ede at the May 2007 meeting, Mr Boaden does not believe that to be the case. He acknowledges however that he must have been involved in discussions at some point for the $200,000 facility could not have been documented without his involvement. His recollection is that Mr Ede returned with documents for him to sign and that is what he did. He notes his signature was witnessed by Mr Ede and not an employee of CFSL.
[27] It is Mr Haydon’s evidence that Mr Boaden had owned assets that he had transferred to others. Mr Boaden denies this and notes of Mr Haydon’s evidence that in relation to CFSL’s loans checks were made to ascertain details of property owned and that no security had been taken over any property of Mr Boaden because, as Mr Boaden says, no property was located in which he had an interest.
[28] Mr Boaden says he became aware of NTTCL at about the time Mr Ede claimed to be arranging finance to buy the business of NTL. He says he was not aware it had received money from CFSL that should have gone to NTL. He says the loan proposal referred to in CFSL’s letter of 19 July 2007 (in which Mr Boaden is referred to as a guarantor of an advance to NTTCL) never eventuated. Mr Boaden
understood that NTTCL had a similar name to NTL because that was the entity Mr
Ede was going to purchase the business through.
[29] Mr Boaden says that by July 2007 CFSL must have been aware that Mr Boaden had no financial control and interest in NTTCL because they must have carried out a company search at that time. Regarding CFSL’s evidence comprising a copy of an internal document showing the advance to NTL, Mr Boaden says that internal document does not detail the advance accurately and that the advance was paid to NTTCL and not NTL.
[30] Mr Boaden rejects claims that Mr Ede may have had authority to redirect to other accounts payments due to NTL and says that Mr Ede had no authority to deal with NTL’s drawdown facilities as he pleaded. It is a fact, Mr Boaden says that no amount of the loan monies was ever received into NTL’s bank account; that the loan payments were made as direct bank transfers from CFSL to NTTCL.
Principles
[31] Considerations routinely regarded as being of significance upon applications to set aside judgment include:
(a) The defendant has a substantial ground of defence; (b) The delay is reasonably explained;
(c) The plaintiff will not suffer irreparable damage if the judgment is set aside.
[32] The onus is on the defendant as applicant to adduce sufficient evidence and then for the Court to conclude that there is a defence to the plaintiff’s claim.
[33] Aspects of delay can in overview be explained by the fact that having obtained its judgment against Mr Boaden, CFSL waited nearly five years before taking action to recover payment. Also it is not certain Mr Boaden received notice of CFSL’s original pleading.
[34] It is clear there is an acceptable account for the delay that has occurred and that there is no real irreparable injury to CFSL if the judgment is set aside.
Considerations
[35] CFSL’s position is that there is no defence to its claim. It says Mr Ede acted at all times with the extensible or apparent authority as agent for NTL and as a principal vis-à-vis dealings with CFSL.
[36] CFSL says there was a representation by Mr Boaden and or NTL that Mr Ede had the authority to enter into relevant transactions. They say Mr Ede was held out as entitled to act on behalf of NTL in a business capacity.
[37] Obviously Mr Boaden’s account rejects clams of ostensible or apparent authority given to Mr Ede. But, if NTL or Mr Boaden had represented or permitted it to be represented that Mr Ede had authority to act on their behalf then they are bound by Mr Ede’s actions if CFSL in good faith relied on those representations, even if Mr Ede indeed had no such actual authority, indeed even if Mr Ede was acting fraudulently.
[38] CFSL’s position is that Mr Ede was represented at all times by Mr Boaden and NTL as having the requisite authority to bind NTL in all its dealings with CFSL. If that is so then it is irrelevant whether in actual fact, as Mr Boaden contends, that Mr Ede was not so authorised.
[39] Mr Boaden was the sole director and shareholder of NTL at all material times. Mr Ede was employed by NTL apparently as its sales manager, at least there are documents indicating such. Throughout the relevant period, as known to both Mr Boaden and to CFSL, Mr Ede was a bankrupt.
[40] CFSL has provided financial assistance through a factoring arrangement since 2005. Mr Haydon of CFSL dealt with Mr Boaden and Mr Ede throughout. Those factoring services were arranged pursuant to written deeds of assignment.
Some of these were signed by Mr Boaden and others by Mr Ede. In his second affidavit Mr Haydon deposed:
[22] As far as CFL and I were aware it was Mr Ede who was responsible for the day to day management of NTL and who undertook that role with Mr Boaden’s full knowledge, authority and at his behest. As I have already stated this was in accordance with the written confirmation provided by Mr Boaden in the deeds of assignment that it was Mr Ede who was the “contact person” for NTL.
[41] Clearly most if not nearly all instructions to CFSL were provided by Mr Ede on NTL’s letterhead. Evidence shows a number of examples of instructions of that kind to deposit funds into an account which is now known to have been controlled by Mr Ede personally.
[42] CFSL accepts that in doing so Mr Ede has acted fraudulently. CFSL says that the actions of Mr Ede in instructing CFSL to apply funds in a certain way were within the scope of his apparent authority and accordingly bind NTL as principal and Mr Boaden as guarantor.
[43] Mr Boaden says Mr Ede’s actions were outside the scope of his apparent authority and consequently he is not liable as guarantor. Mr Boaden says in fact that none of the funds obtained in this manner by Mr Ede were received at all by NTL. CFSL’s rejoinder is that at no time during the relevant period was any complaint received from Mr Boaden as to the application of the funds advanced under the factoring arrangements.
[44] It is CFSL’s evidence that on 28 May a facsimile was sent to Mr Boaden recording and confirming the details of the $200,000 loan facility including reference to the prior partial advance of $26,000. The formal loan agreement and guarantee was signed by Mr Boaden on 29 May 2007. It contained the same reference to the partial prior advance.
[45] The balance of the $200,000 loan facility was released to NTL in accordance with Mr Ede’s written instructions on NTL letterhead. The account reference given was that same account to which CFSL had routinely been instructed by Mr Ede to deposit funds around that time.
[46] Ms Fletcher submits that any conflict of evidence is not an issue in this case and that any perceived differences between the evidence of Mr Boaden and Mr Haydon are either irrelevant or immaterial to the questions to be determined. The issue counsel submits is not about whether or not Mr Ede has actual authority of NTL to divert funds advanced by CFSL but whether NTL allowed Mr Ede to do so by representing to CFSL that he had the requisite authority to deal with all financial matters between them.
[47] Mr Boaden was the sole director and should have been aware of the day to day details of the financial position of the company; that if he did not and if funds were being diverted by Mr Ede then, Ms Fletcher submits, Mr Boaden only has himself to blame.
[48] Mr Hayes notes that NTL never received any part of the $200,000 loan. Mr Boaden said he never requested a drawdown of those funds. Yet the documentation disclosed a clear provision for drawdown advances totalling $26,000 even prior to documentation being completed.
[49] The case for Mr Boaden highlights evidence now available that Mr Ede’s frauds were also perpetrated during the pre-loan agreement factoring arrangements for which purpose Mr Ede was noted as a contact person whose responsibility as a sales manager required him to collect the information for presentation to CFSL and upon receipt of which CSL would respond to requests for funding to be made available.
[50] It is clear Mr Boaden took little or no part in this function. In all respects it
seems CFSL’s contact and communication was with Mr Ede.
[51] Evidence available shows that in perpetrating his fraud Mr Ede had set up NTTCL in order to channel to that company funds receivable by NTL. The similarity of the names of the two companies did not draw enquiry or suspicion from Mr Boaden or Mr Haydon or apparently from the Bank. Neither did it apparently concern Mr Boaden when in September 2007, many months after the May 2007 loan
arrangement drawdown it seems Mr Boaden was agreeable to guaranteeing an advance to NTTCL although that arrangement did not proceed.
[52] Mr Boaden asserts CFSL was at least negligent for accepting instructions to split payments for deposits into separate accounts; the inference being that that kind of instruction must have alerted CFSL to the possibility that payments were not going to NTL and they should have been.
[53] Criticism is also made of the fact that directions from Mr Ede on behalf of
NTL clearly identified on occasions the name of Neil Timber Trust and not NTL.
[54] It is the case for Mr Boaden that there was a considerable measure of carelessness exhibited by CFSL by its taking actions for the payment of funds to accounts which it had no authority to do so. The submissions of Mr Hayes is that clear issues of negligence or contributory negligence arise suggesting a thorough investigation is required of the circumstances by which these actions were permitted.
[55] Mr Boaden says he does not ever record the drawdown occurring or much less he authorising it. His point is that the circumstances of this financial arrangement were very much different to the factoring arrangements for which Mr Ede was given certain authority of NTL’s dealings with CFSL.
[56] For Mr Boaden it is asked why the drawdown funds were achieved by payment of a $40,000 cheque and a $131,000 direct debit. Why Mr Hayes asked, was drawdown achieved by a cheque and a direct credit payment to the same company on the same day.
[57] He submits CFSL should have had good cause to investigate that somewhat unusual process associated with the drawdown.
[58] Mr Hayes referred to a number of documents wherein the written instructions given by Mr Ede to CFSL were intended to channel payments to the NTTCL account of Mr Ede whilst that payment direction intended to conceal Mr Ede’s purpose.
[59] As Mr Hayes acknowledges both parties agree they were defrauded by a person who cleverly concealed his purpose. Mr Hayes opines that the ANZ Bank may be accountable for permitting payment into an account other than that it was directed to. On behalf of Mr Boaden, Mr Hayes submits CSFL cannot point to any authority written or word authorising contact with Mr Ede as agent for NTL. He challenges CFSL to provide evidence of direct authority to Mr Ede to provide the banking instructions he did. Mr Hay suggests CFSL was grossly negligent for Mr Ede was a bankrupt at the time. CFSL could not have accepted that Mr Ede was acting in the capacity of a manager because as a bankrupt he was not allowed to manage the affairs of the company. If CFSL did that then they were assisting of breaches of the Insolvency Act 2006.
Conclusions
[60] Objective consideration is required regarding claims about whether or not Mr Ede had the actual or ostensible authority of NTL to provide CFSL with directions about where the loan drawdown he deposited.
[61] Before that loan a commercial relationship had endured by which Mr Ede provided direction to CFSL regarding the payment and deposit of funds receivable by CFSL pursuant to the parties factoring arrangement.
[62] There is evidence now that even during the factoring arrangement period that Mr Ede diverted funds due to NTL to his own account. However, apparently NTL suffered no loss by this arrangement in the long term.
[63] Factors influencing objective assessment of what occurred in relation to the loan arrangement cannot be considered in isolation to events characterising the earlier commercial factoring arrangement.
[64] It is inconceivable Mr Ede would have initiated a loan facility of $200,000 on behalf of NTL or Mr Boaden without Mr Boaden’s knowledge. Whilst Mr Boaden says he was not at the initial meeting when the facility was discussed, he
acknowledged he executed the documents which provided for part payment of the drawdown in advance of the documents being signed on 29 May 2007.
[65] Mr Boaden’s evidence is that he did not authorise any drawdown of the loan facility. The issue for the Court is whether from an objective assessment that is so. In this regard the Court considers the following of relevance:
(a) There had been a prior history of directions to CFSL to split payments for payment into separate accounts, ostensibly for the benefit of NTL.
(b)Although in relation to the factoring arrangements Mr Ede had acted fraudulently, this was not known to CFSL or to Mr Boaden.
(c) With the apparent authority of NTL Mr Ede with Mr Boaden’s authority negotiated a $200,000 loan facility containing a provision for priority advancement.
(d)The loan documents anticipated Mr Ede assuming responsibility as a guarantor upon his discharge from bankruptcy towards the end of June 2007.
(e) Certainly by the end of September 2007 Mr Boaden retained his trust in Mr Ede because of his apparent preparedness to guarantee an advance to NTTCL in which company Mr Boaden held no office, nor was he a shareholder of it.
[66] It seems to the Court inconceivable that NTL/Mr Boaden could now deny of Mr Ede the authority it had for two years without question vested in him, in apparently all of its dealings with CFSL. Further, it appears inconceivable that during the two year factoring period in which Mr Ede was conducting fraudulent practices, that there was not a process put in place by NTL to have reviewed the actions which permitted the fraud to occur.
[67] Also, if NTL had not provided Mr Ede with the appropriate authority then one questions how Mr Ede could have drawn down and diverted $200,000 payable
to NTL, and for this fact to have gone unnoticed for four months without Mr Boaden knowing about it, particularly if, as the Court infers, he alone had financial control of NTL’s affairs.
[68] Unquestionably Mr Ede has cheated both his employer and his employer’s commercial financier. But, it is the Court’s view that responsibility for the fraud upon the financier, CFSL, lies solely with the employer who ostensibly vested appropriate financial authority in an employee who caused that to happen.
[69] The Court does not accept claims of contributory negligence much less suggestions of complicity. In short and from an objective assessment sole responsibility for what has occurred was caused by Mr Boaden and NTL vesting near uncontrolled authority in their employee.
Other
[70] CFSL’s judgment against Mr Boaden included a sum of $35,500 in respect of an advance made in September 2007. This sum too was fraudulently diverted by Mr Ede. In the Court’s view there is insufficient evidence to attribute responsibility for that debt to any actions of Mr Boaden. Evidence in support of CFSL’s claim is provided by an undated handwritten document. There was no evidence in respect of this payment of any actual or ostensible authority provided by Mr Boaden or NTL.
[71] Ms Fletcher submitted that if the Court was troubled with respect to the
$35,500 component of CFSL’s claim then the Court should simply vary the judgment to the extent of that amount. Perhaps the Court’s inherent jurisdiction might permit that to be done. The issue was not one addressed by counsel in their submissions. But, if that option is available then account should also be taken of the interest that accrued on that amount.
[72] The bankruptcy notice required payment of the judgment debt together with interest of $110,967.29. That figure was calculated by use of the Judicature Act rate between the date of the judgment debt and the date of the issue of the bankruptcy
notice. As the bankruptcy notice indicates the period in question amounted to 1,744 days or nearly five years.
[73] There are two reasons then for questioning CFSL’s calculation of the amount of the debt due:
(a) Because the judgment debt included a sum of $35,500; and
(b)Because the length of time that elapsed before legal process was engaged in relation to recovery of that debt.
[74] It appears from the evidence of Mr Haydon that recovery was not sought until CFSL became aware of information suggesting Mr Boaden may have divested himself of interests in New Zealand property with the intention, Mr Haydon believed, of defeating creditor claims. Mr Boaden has denied this and implies that CFSL may have had expectations of recovery from Mr Ede up until that time criminal charges were laid against Mr Ede.
[75] It occurs to the Court that the information that Mr Haydon says he has obtained regarding Mr Boaden’s property interests was available for discovery long before the bankruptcy notice issued. All of this may have relevance to the question about the amount of interest claimed in the bankruptcy notice.
[76] Reference to these matters was not addressed in counsels’ submissions. Perhaps then the Court should not be concerned with them. On the other hand it may be unjust to enforce a bankruptcy notice without having regard to related claims which might substantially reduce Mr Boaden’s obligation to pay.
[77] In the circumstances the Court proposes there be a brief adjournment of the setting aside hearing to enable counsel to consider these matters. It remains the Court’s clear view that Mr Boaden does not have an arguable defence that Mr Ede acted without the actual or ostensible authority of Mr Boaden in connection with the drawdown of the $200,000 loan. Whilst NTL is entitled to a judgment against Mr
Boaden the amount of the judgment for which it is entitled to proceed upon its adjudication application is unclear.
Interim decision
[78] The setting aside application is adjourned for call at 11:45am on 19 June
2014, when the bankruptcy application will be called.
Associate Judge Christiansen
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