Crown Finance Ltd v Cronin - [2018] NZHC 1289

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2725

[2018] NZHC 1289

BETWEEN
CROWN FINANCE LIMITED

Plaintiff

AND

TIMOTHY MORGAN FITZGERALD CRONIN

Defendant

Hearing: 22 May 2018

Appearances:

K J Webster and C Boswell for the Plaintiff M J Fisher and K J Ng for the Defendant

Judgment:

1 June 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 1 June 2018 at 3:30pm
pursuant to Rule 11.5 of the High Court Rules.

…………………………………
Deputy Registrar

Solicitors:
Wilson Harle (K J Webster), Auckland, for the Plaintiff Claymore Partners Ltd, Auckland, for the Defendant
Copy for:
Michael Fisher, Auckland, for the Defendant

CROWN FINANCE LIMITED v CRONIN [2018] NZHC 1289 [1 June 2018]

[1] Malone No.5 Ltd was a single venture property developer. It carried out a development at 3 Taylors Ave, Bryndwr, Christchurch, by subdividing the property into two sections and building a townhouse on each section. Under a loan agreement of 10 September 2015 Crown Finance Ltd advanced funds to Malone No.5 Ltd to finance the development. The loan was repayable on 15 June 2016 but was extended to 18 November 2016. Malone No.5 Ltd did not repay. Crown Finance Ltd made demand and appointed a receiver under a general security agreement. The receiver completed the development and sold the townhouses. The purchaser, Dacia Properties Ltd, a company related to Crown Finance Ltd, paid $882,00 for each property. Crown Finance Ltd says that the short-fall after receiving the proceeds of sale from the receiver is $762,278.81 as at 1 November 2017. It sues Mr Cronin, the director of Malone No.5 Ltd, under a guarantee dated 10 September 2015. Crown Finance Ltd applies for summary judgment. It says that the amount owing under the loan as at the date of hearing is $835,087.33 after taking into account further payments from the receiver and updating interest.

[2] Mr Cronin opposes, saying that the receiver breached his duties under ss 18 and 19 of the Receiverships Act 1993 to obtain the best price reasonably obtainable at the time of sale, and that Crown Finance Ltd was involved in those breaches, as it obtained the properties for the benefit of a related company at below the best price reasonably obtainable – $1,160,000 each.

[3] Crown Finance Ltd, in response, denies any breach of duty by the receiver and that it can be liable for any sale at an undervalue by the receiver. It also says that even if the properties had sold at the prices for which Mr Cronin contends, he would still face a shortfall.

[4] There is no dispute as to the principles on a plaintiff’s application for summary judgment.1 To give a plaintiff summary judgment the court must be satisfied that judgment can be entered now, without the need for further interlocutory steps such as discovery and interrogatories or for a full hearing with witnesses giving evidence in person and being cross-examined.

1 See

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 1289
Decision Date: 1 June 2018

CaseChat Overview and Summary

The case before the court involved a dispute between Crown Finance Ltd, the plaintiff, and Timothy Morgan Fitzgerald Cronin, the defendant. Crown Finance Ltd sought summary judgment against Cronin, who had guaranteed a loan made to Malone No.5 Ltd, a property development company. The loan was advanced to finance the development of a property at 3 Taylors Ave, Bryndwr, Christchurch. The loan was not repaid, and Crown Finance Ltd appointed a receiver who completed the development and sold the property. Cronin opposed the summary judgment application, arguing that the receiver breached his duties under the Receiverships Act 1993 by selling the property at an undervalue and that Crown Finance Ltd was involved in those breaches. The court had to decide whether the receiver complied with his duty under s 19 of the Receiverships Act, whether Crown Finance Ltd could be held liable for any breach of duty by the receiver, and whether there was any minimum amount for which Cronin was liable, even if he had an arguable defence as to the sales by the receiver. The court found that the receiver had taken steps consistent with complying with his duty under s 19 of the Receiverships Act. However, the sales to a related company of Crown Finance Ltd required increased scrutiny. There was enough evidence to show an arguable case that Crown Finance Ltd was involved in the receiver's decision to sell to Dacia Properties Ltd, a related company. The matter needed to be tried in the normal way. The court also found that the no set-off provisions in the agreements were ineffective to bar Cronin from raising breaches of s 19 of the Receiverships Act by way of defence to the claim by Crown Finance Ltd. The court calculated a minimum figure for Cronin's liability, which was $63,612.81 plus interest at the default rate from 26 September 2017 to the date of judgment. The court granted the summary judgment application in part, awarded costs to Crown Finance Ltd, and set further case management directions.

Orders