Davidson v Bowater
[2020] NZHC 2324
•8 September 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2020-404-000595
[2020] NZHC 2324
UNDER Part 9 of the District Courts Act 2016 IN THE MATTER OF
an appeal against an order for summary judgment
BETWEEN
BEAU-FLETCHER DAVIDSON
First Appellant
AND
JOY HALLORAN-DAVIDSON
Second Appellant
AND
SANDRA JOY BOWATER
Respondent
Hearing: 13 August 2020 Appearances:
C G Smith for the Appellants
J T Burley and K T O’Halloran for the Respondent
Judgment:
8 September 2020
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 08 September 2020 at 2.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
Kennelly law, Orewa
FortyEight Shortland Barristers, Auckland McVeagh Fleming, Auckland
DAVIDSON v BOWATER [2020] NZHC 2324 [8 September 2020]
Introduction
[1] In February 2015 the appellants, Mr Davidson and Ms Halloran-Davidson, requested a loan of $50,000 from the respondent, Ms Bowater. This request was made in a family context: Mr Davidson and Ms Halloran-Davidson are married; Ms Bowater and Ms Halloran-Davidson are sisters.
[2] Ms Bowater agreed to lend $50,000. She paid that amount to a bank account nominated by Mr Davidson.
[3] In July 2015 Mr Davidson approached Ms Bowater and asked for a further loan of $5,000. Ms Bowater agreed to lend $5,000. She paid that amount in two separate tranches to two bank accounts nominated by Mr Davidson.
[4] Neither loan was documented, at least at the time of the advances. The loans were not repaid. Ms Bowater sued Mr Davidson and Ms Halloran-Davidson for repayment. Judge Harrison granted Ms Bowater summary judgment on her claim.1
[5] Mr Davidson and Ms Halloran-Davidson appeal. They accept that they requested the two loans from Ms Bowater, and that Ms Bowater advanced the money to the nominated bank accounts. They also accept that, for the most part, the loans have not been repaid. But they say that they requested the loans on behalf of a company (HTE Holdings Ltd (HTE Holdings)) and on behalf of a family trust, and that only those parties are liable to repay the loans.
[6] The essential matter in dispute, therefore, is the identity of Ms Bowater’s debtor. In the summary judgment context, was Judge Harrison right to find that Ms Bowater had established that the appellants had no reasonably arguable defence that the loans were to HTE Holdings and the family trust, rather than to the appellants?
Factual narrative
[7] Much of the factual narrative is not in dispute. I will set out the key events, identifying areas of relevant dispute, to which I will return later in my judgment.
1 Bowater v Davidson [2019] NZDC 17144.
[8] Mr Davidson was adjudicated bankrupt on 22 March 2013. He had been a director of HTE Holdings, but could not continue in that role during his bankruptcy. He was still bankrupt when the loans were advanced in 2015. When he was eventually discharged from bankruptcy he resumed being a director of HTE Holdings.
[9] Ms Halloran-Davidson was adjudicated bankrupt on 31 January 2014. She was bankrupt at the time the two loans were advanced.
[10] In February 2015 Mr Davidson was employed by Henderson Trailers Ltd (Henderson Trailers) as an approved heavy vehicle certifier. This was in Hastings. On 20 February 2015 Henderson Trailers was placed in receivership. The receiver seized computers that Henderson Trailers was leasing from HTE Holdings.
[11] Mr Davidson’s interests appear to have been aligned with HTE Holdings. He and/or HTE Holdings wanted the computers back. An opportunity arose to purchase the computers. On about 25 February 2015 the appellants approached Ms Bowater for a loan of $50,000 for the purpose of purchasing the computers. There is no dispute that Ms Bowater knew that was the purpose of the loan. But, as noted, there is a dispute as to whether the loan was made to the appellants or made to HTE Holdings.
[12] Ms Bowater agreed to loan $50,000. Mr Davidson asked Ms Bowater to make the payment to Lunn & Associates, a firm of solicitors. Ms Bowater did so on 27 February 2015. The narration on Ms Bowater’s bank statement for this payment was:
PAY Lunn Assoc Loan HTL
[13] On about 20 July 2015 Mr Davidson asked Ms Bowater to lend a further amount of $5,000. Ms Bowater agreed to lend $5,000. On 27 July 2015 she made two payments, one of $900 and the other of $4,100. The respective narrations on Ms Bowater’s bank statement were:
Pay HTF [$900]
Pay HTE Holdings [$4,100]
[14] Ms Bowater deposed that she made these two payments “to HTE Holdings Limited, at Mr Davidson’s request”. In fact only the second payment was to HTE Holdings’ bank account. The first payment of $900 was paid to a bank account of the Halloran Family Trust. In any case, there is a dispute as to who is liable to repay these advances. Ms Bowater says that the loan was to the appellants, who nominated the bank accounts into which payments were to be made. The appellants’ position is that the $4,100 was another loan to HTE Holdings, and that the $900 was a loan to the Halloran Family Trust.
[15] The loans were informal. There was no documentation of the loans at the time of the advances. There was no evidence of any oral discussion of key loan terms such as interest, security, or even the date of repayment.
[16] Later in 2015 the three parties entered into a written agreement to renovate a property in Castor Bay, Auckland. Ms Bowater was to purchase the property in her sole name. Mr Davidson and Ms Halloran-Davidson were to contribute money toward re-cladding and renovation. The agreement provided for any profits to be shared.
[17] On 11 February 2017 there was a meeting between Ms Bowater, Mr Davidson and Ms Halloran-Davidson to discuss the renovation of the Castor Bay property. Two others were in attendance: Ms Gunn (Ms Bowater’s daughter) and Ms Jonker (a support person for Ms Halloran-Davidson). Ms Gunn prepared minutes of the meeting. Those minutes ran to nine pages. Almost all of the meeting was directed to the Castor Bay property renovation. But at the end of the meeting the minutes recorded, under “General Business”, the following:
Sandra [Ms Bowater] also wanted it documented that Joy [Ms Halloran- Davidson] and Beau [Mr Davidson] also owed her a separate $50,000 for computers that were purchased on their behalf from their previous business. Joy and Beau acknowledged this debt was still owed.
[18] The minutes were emailed (twice) to Mr Davidson and Ms Halloran-Davidson with a request that they take time to review them and advise any changes or additions. Ms Halloran-Davidson replied by email on 23 February 2017: “Beau and I have read the minutes, and agree they are an accurate record.” Her email was copied to Mr Davidson. Mr Davidson raised no objection to Ms Halloran-Davidson’s email. A
few days later, after Ms Gunn had emailed minutes for a further meeting held on 26 February 2017, Mr Davidson responded: “Thank you for the minutes. Again, a good record of the meeting.”
[19] Ms Halloran-Davidson now says that the minutes of the 11 February 2017 meeting were inaccurate. She says that at the meeting there was much discussion of the loans being to HTE Holdings, and those loans being repaid from the proceeds of the Castor Bay property.
[20] Mr Davidson does not say that the minutes of the 11 February 2017 meeting were inaccurate. He merely says: “At no time have I agreed any of the minutes to meetings having been a true and correct record.”
[21] By June 2017 the loans had not been repaid. Ms Bowater’s son, Mr Gunn, sent an email on her behalf to Mr Davidson and Ms Halloran-Davidson seeking repayment of “the $55,000 loans paid to you in two parts”. Mr Gunn asked them to investigate finance options so that the loans could be repaid by the end of July 2017. Mr Davidson responded by email on 29 June 2017. He did not dispute that the loans were outstanding. His email included:
We have no additional funds available to contribute, so as an extension of that there are no funds available to repay Sandra at this time. …
The loan from Sandra was to be repaid from the future sale proceeds from [the Castor Bay property].
[22] On 4 August 2017 Mr Gunn sent a message to Ms Halloran-Davidson by Facebook Messenger, asking for a repayment plan for the loans. Ms Halloran- Davidson’s email reply on 6 August 2017 included:
On the subject of the loan, Beau and I have never disputed that we owe Sandra the $50,000 – this was documented by Mandy [Ms Gunn] in the minutes of the 11th of February 2017.
It was also understood, that the repayment would happen from the proceeds of the sale of the property. …
[23] This email eventually formed part of an email chain into which Mr Davidson was copied. He raised no objection to Ms Halloran-Davidson’s acknowledgement that liability had never been disputed.
[24] Mr Gunn responded by email on 8 August 2017, clarifying that there were two loans totalling $55,000, and disputing that there was any agreement that the loans were to be repaid from the proceeds of sale of the Castor Bay property. He sent another email (copied to Mr Davidson) on 30 August 2017, requesting a repayment plan “for my mothers [sic] personal loans to the Davidsons”. Neither Ms Halloran-Davidson nor Mr Davidson took issue with that description.
[25] By July the following year the loans had still not been repaid. On 26 July 2018 Ms Bowater’s solicitors wrote to Mr Davidson and Ms Halloran-Davidson demanding repayment of the loans. The solicitors’ letter referred to and enclosed copies of the minutes (which recorded Mr Davidson and Ms Halloran-Davidson acknowledging still owing the $50,000 loan), Ms Halloran-Davidson’s email of 6 August 2017 (in which she said they had “never disputed that we owe Sandra the $50,000 – this was documented by Mandy in the minutes”), and Mr Davidson’s email of 29 June 2017 (which said that he and Ms Halloran-Davidson had no money to repay Ms Bowater at that time). The letter addressed, and rejected, the suggestion that the appellants had made that the loans were to be repaid from the sale proceeds of the Castor Bay property.
[26] Ms Halloran-Davidson does not appear to have responded to the solicitor’s letter. But Mr Davidson did respond, by email, in early August 2018. His email said that by making the claim Ms Bowater was defaming him, or was using a document to unduly enrich herself. The only passages in his email that engaged with the demand for repayment were these:
Your client has received funds directly and indirectly to the benefit of her estate that exceed the claim.
Further please advise your client as a result of their claim we will be making a counter claim against your client and estate for outstanding contributions.
[27] Ms Bowater was unperturbed by Mr Davidson’s threat of a counterclaim. She brought her summary judgment proceeding in October 2018. Her affidavit in support addressed, and rejected, the only defence that Mr Davidson and Ms Halloran- Davidson had by then raised: the allegation that it had been agreed that the loans be repaid only from the sale proceeds of the Castor Bay property.
[28] In March 2019 Mr Davidson and Ms Halloran-Davidson each served statements of defence and notices of opposition, and each made affidavits. In these documents they raised for the first time the defence that Ms Bowater’s loans had been to other parties (HTE Holdings and the Halloran Family Trust) rather than to them.
[29] Below I will assess whether Ms Bowater established that their defence was not reasonably arguable. First, it is necessary to say something about the course of the proceeding in the District Court.
The District Court proceeding
[30] In the District Court (but not on appeal) Mr Davidson and Ms Halloran- Davidson represented themselves. Nonetheless, their statement of defence and documents in opposition (dated 25 March 2019) were well constructed. It is evident that in preparing them they paid attention to, and were able to follow, the relevant requirements of the District Court Rules 2014.
[31] In late April 2019 Ms Bowater served affidavits in reply from herself and from Mr Gunn. A hearing was then scheduled for 30 August 2019, with an exchange of written submissions timetabled for shortly before the hearing.
[32] Mr Davidson and Ms Halloran-Davidson were scheduled to file and serve their submissions on 23 August 2019. On that day they served affidavits “in reply” that they had each made to the reply affidavits of Ms Bowater and of Mr Gunn. Their reply affidavits were many times longer than their initial affidavits.
[33] Ms Bowater objected to those late reply affidavits. The parties filed memoranda. It seems that in their memorandum Mr Davidson and Ms Halloran- Davidson referred to their affidavits as “submissions”. Judge Harrison directed that
the late affidavits be excluded as to new matters of fact, but that they could be referred to in so far as they contained valid submissions. His Honour’s reason for excluding the affidavits was that r 12.11 of the District Court Rules did not permit a defendant to file a reply affidavit to the plaintiff’s reply affidavit.
[34] The hearing on 30 August 2019 therefore proceeded without reference to the evidence contained in Mr Davidson and Ms Halloran-Davidson’s reply affidavits. On appeal, Mr Davidson and Ms Halloran-Davidson say that the Judge was wrong to exclude those affidavits.
Judge Harrison’s decision
[35] Judge Harrison briefly outlined the background. He said that the evidence initially suggested that the defence was that the loans would be repaid only on sale of the Castor Bay property. But he recorded that the defendants confirmed at the hearing that their defence was limited to the allegation that the loans were made to other parties, and were not loans to the defendants.2
[36]The Judge then set out the relevant summary judgment principles:
[10] … The plaintiff has the onus of convincing the Court that the defendant has no fairly arguable defence. If the plaintiff passes that threshold the onus is then cast on the defendant to raise issues of fact or law which may raise an arguable defence. If the defendant fails to do so then judgment in favour of the plaintiff should follow – Pemberton v Chappell.
[11] Where the defendant’s statements are so inherently improbable, lacking in credibility or are so inconsistent with other positive evidence, the Court may conclude that there is no arguable defence – Attorney-General v Rakiura Holdings Ltd.
(footnotes omitted)
[37] His Honour then addressed whether there was an arguable defence to Ms Bowater’s claim. He observed that the loans were “typical of inter-family loans”,3 and that not “a shred of paper was produced which recorded any loan to the company [ie, HTE Holdings] or any security it may have provided to ensure repayment of the
2 Bowater v Davidson [2019] NZDC 17144 at [8].
3 At [12].
loan”.4 That the loans were made to Mr Davidson and Ms Halloran-Davidson was confirmed by the minutes of the meeting on 11 February 2017, and by Ms Halloran- Davidson’s email of 6 August 2017.5 The defence raised was not credible.
The appellants’ grounds of appeal
[38]The appellants claimed there were three errors in the Judge’s decision:
(a)The Judge erred by placing on onus on the appellants to establish an arguable defence, when the onus always remained on Ms Bowater to establish that there was no arguable defence.
(b)The Judge erred by not exercising his discretion to allow the appellants’ late “reply” affidavits.
(c)The Judge should have found that Ms Bowater had not established that the appellants have no defence.
Did the Judge incorrectly place the onus on the appellants?
[39]Ms Smith, who appeared for the appellants, criticised the Judge’s statement at
[10] of his judgment (quoted earlier) that if the plaintiff passes the threshold of convincing the Court that the defendant has no fairly arguable defence “the onus is then cast on the defendant to raise issues of fact or law which may raise an arguable defence”. Ms Smith says, relying on the Court of Appeal’s decision in MacLean v Stewart, that the onus does not switch to the defendant.6 The Judge’s supposed error is said to be reflected in his conclusion that “No credible defence has been demonstrated to exist”.7
[40] Ms Smith is correct that in a summary judgment application the onus is always on the plaintiff to satisfy the Court that the defendant has no defence. But I do not think that Judge Harrison was suggesting otherwise. The sentence that the appellants
4 At [14].
5 At [19]–[20].
6 MacLean v Stewart (1997) 11 PRNZ 66 (CA) at 69.
7 Bowater v Davidson [2019] NZDC 17144 at [24].
criticise begins “If the plaintiff passes that threshold” – namely, the threshold of convincing the Court that the defendant has no arguable defence. His Honour was therefore well aware that the onus was on Ms Bowater.
[41] As to the Judge’s statement that no credible defence had been demonstrated to exist, that in my view simply refers back to his Honour’s statement, quoted earlier, that “Where the defendant’s statements are so inherently improbable, lacking in credibility or are so inconsistent with other positive evidence, the Court may conclude that there is no arguable defence”.8 It is clear from the Judge’s reasons that he regarded the appellants’ defence as lacking credibility (largely because of its inconsistency with contemporary documents).
Should the Judge have allowed the late reply affidavits?
[42] Ms Smith submitted that the Judge should have exercised the discretion available to him under rr 1.7 and 1.8 of the District Court Rules to admit the late affidavits. Rule 1.7 provides that where “any question arises as to the application of any provision of these rules or the High Court Rules, the court may, either on the application of a party or on its own initiative, determine the questions and give any directions it thinks just”. Rule 1.8 deals with instances of non-compliance with the Rules.
[43] Ms Smith submitted that it was just to admit the affidavits because the appellants were lay litigants in the District Court (and therefore unfamiliar with the rules), and because the late affidavits contained a significant amount of evidence which contradicted the Judge’s factual assessment.
[44] Mr Burley, who appeared for Ms Bowater, submitted that the appellants’ decision not to engage legal counsel was made freely, and Ms Bowater should not be prejudiced because of its consequences. He submitted that rr 1.7 and 1.8 afforded a wide latitude to Judge Harrison to determine admissibility as he felt was just, which he did without erring in law. Finally, he said that even if Judge Harrison had accepted the late affidavits it would not have made a difference to the outcome.
8 At [11].
[45] It is correct that, as Judge Harrison said, r 12.11 does not provide for a defendant to file affidavits in reply to the plaintiff’s reply affidavits. However, it is also correct that the Rules do not expressly prohibit further affidavits (which would more properly be termed in rejoinder, rather than in reply). A series of decisions have confirmed that a Court therefore has a discretion to allow a defendant to file and serve a further affidavit, where that is what justice requires. As the Court of Appeal has put it, although a defendant has no right to file an affidavit by way of rejoinder, the defendant can seek leave to do so.9
[46] This is particularly important in the summary judgment context. The point was well put by John Hansen J in Nelson Lifecare Centre Ltd v Sampson:10
[I]f further affidavits are not allowed to be filed by a defendant, the consequence could be that summary judgment could be entered against the defendant who had a perfectly valid defence. The drafters of the Rules could not have envisaged such possible injustice arising from their strict application. I agree with the Judge in the Allied Mortgage Nominees Ltd case that it is not a practice to be encouraged. However, given the very frailties of human nature, it is inevitable that on occasions both plaintiffs and defendants, or their advisers, will, for some reason, not place relevant material going to the heart of whether or not summary judgment should be granted before the Court in the initial affidavit. It would almost make a mockery of the procedure if too rigid an application of the Rules led to that situation. It is a matter that can be readily and properly controlled by awards of costs, but it is important that all relevant material should be placed before the Court to enable justice to be done between the parties. Furthermore, I take the view of the Rules that they do not prohibit the filing of such further affidavits. They are simply silent in that regard, and in those circumstances, it is quite proper of the Court to invoke r 4 and r 9,11 in the appropriate circumstances, to allow such further affidavits to be filed on the necessary terms.
[47] In Jones v L & Y Holdings Ltd defendants had attempted to file reply affidavits late, and the plaintiffs’ case had been prepared without seeing them.12 Despite considering the failure to file evidence on time “unacceptable”, Associate Judge Faire
9 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [29].
10 Nelson Lifecare Centre Ltd v Sampson (1995) 8 PRNZ 376 (HC) at 381–382. To similar effect is Rowlands of Christchurch Ltd v Colwall Property Investment Ltd HC Christchurch AP 219/96, 21 May 1997.
11 Of the District Court Rules 1992. Rule 4 provided for the construction of rules so as to secure the just, speedy and inexpensive determination of matters. Rule 9 provided for cases where procedure was not provided for in the rules or elsewhere.
12 Jones v L & Y Holdings (Holding) Ltd HC Auckland CIV-2010-404-1667, 28 July 2010 at [6].
considered that refusing to read the evidence would go too far, in potentially causing a proper defence to be “denied with obvious injustice”.13
[48] Judge Harrison did not address whether he should exercise a discretion to admit the late affidavits. He simply held that, because of r 12.11, the late affidavits could not be admitted. It appears that the arguments presented to his Honour were channelled through the narrow confines of that rule.
[49] I do not have to decide whether the Judge should have exercised his discretion to allow the late affidavits to be admitted. Both parties made extensive submissions on the material in the late affidavits, Mr Burley submitting that even if they were admitted, Ms Bowater would still succeed in showing that there is no arguable defence to her claim. Given that those submissions were made, I have preferred to determine the appeal on the basis of the material in the late affidavits.
[50] In taking this approach I do not mean any criticism of Judge Harrison’s decision to exclude the affidavits. If his Honour had addressed his discretion whether to admit the late affidavits, he may have come to the conclusion that he should not have admitted them, and that conclusion may not have been assailable on appeal. This is because there were unsatisfactory aspects to the late affidavits.
[51] Many of the documents that Mr Davidson and Ms Halloran-Davidson exhibited to their “reply” affidavits are ones that must have been available to them when they made their initial affidavits in March 2019. Much of the material in the affidavits merely expands upon points that they made in their initial affidavits. Not only is that material not in rejoinder to Ms Bowater’s reply affidavit, it self-evidently could have been provided in their initial March 2019 affidavits.
[52] I acknowledge that some of the material contained in their reply affidavits was not available to them when they made their initial affidavits. But it was available to them many months before the date on which they served their reply affidavits (on 23 August 2019, one week before the hearing).
13 At [8].
[53] In particular, Mr Davidson and Ms Halloran-Davidson had taken the step of obtaining affidavits from three other people. They then annexed those three other affidavits to their own affidavits, as exhibits. This peculiar mode of providing the affidavits to the Court is not, of itself, of concern. What is of concern is that those other affidavits are dated 18 April 2019, 10 June 2019, and 4 July 2019. The appellants were in a position to file and serve those other affidavits on those dates, but chose not to file or serve them until one week before the hearing.
[54] There was no apparent excuse for the lateness of the affidavits. I was told from the bar that Mr Davidson and Ms Halloran-Davidson mistakenly believed that they were able to provide further affidavits as part of their submissions for the hearing, and that they therefore did not hold them back deliberately. But there is no evidence of this. Mr Davidson and Ms Halloran-Davidson made affidavits in support of their appeal, asking that their reply affidavits be admitted. Those affidavits in support do not address, let alone explain, the lateness of their reply affidavits.
Did Ms Bowater establish that the appellants have no defence?
[55] Under r 12.2 the Court may give judgment against a defendant if satisfied the defendant has no defence. The Court of Appeal has held that the words “no defence” mean “no bona fide defence, no reasonable ground of defence, no fairly arguable defence”.14
[56] The Court need not accept uncritically evidence that is inherently lacking in credibility. This may happen where the evidence is inconsistent with undisputed contemporary documents or other statements made by the same deponent, or where the evidence is inherently improbable.15 The Court may take a robust and realistic approach to conflicts of evidence, and enter judgment for the plaintiff, where the facts warrant it.16
14 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.
15 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341; and Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
16 Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA); and Krukziener v Hanover Finance Ltd at [26] and [29].
A robust approach is warranted
[57]The following facts of this case warrant a robust approach.
[58]First, although the loans were not initially documented, the first loan (of
$50,000) was subsequently documented in the minutes of the meeting of 11 February 2017. The minutes record that the very purpose of Ms Bowater mentioning the loan was that she wanted it “documented”. The minutes then say that Mr Davidson and Ms Halloran-Davidson “acknowledged” that the debt was still owed.
[59] Those minutes were not a mere unilateral creation of Ms Bowater. Ms Gunn emailed the minutes to Mr Davidson and Ms Halloran-Davidson for their review. Ms Halloran-Davidson (having had ten days to review the minutes) sent an email on 23 February 2017 saying that she and Mr Davidson had read the minutes, and agreed “they are an accurate record”. Her email was copied to Mr Davidson. Mr Davidson raised no objection to Ms Halloran-Davidson’s statement that the minutes were accurate. A few days later, after Ms Gunn had emailed minutes of a further meeting, Mr Davidson responded said that they were “again” a good record of the meeting.
[60] Secondly, there was a further acknowledgement that Mr Davidson and Ms Halloran-Davidson owed the $50,000 loan in Ms Halloran-Davidson’s email of 6 August 2017. There she said that she and Mr Davidson had “never disputed that we owe Sandra the $50,000”, and that this had been “documented” in the minutes of the meeting of 11 February 2017. This email eventually formed part of an email chain into which Mr Davidson was copied. He raised no objection to the acknowledgement.
[61] Thirdly, the appellants were given multiple opportunities, before Ms Bowater commenced this proceeding, to raise any defences that they may have had to Ms Bowater’s claim for repayment of the loans:
(a)On 28 June 2017 Mr Gunn sent an email to Mr Davidson and Ms Halloran-Davidson seeking (on behalf of Ms Bowater) repayment of “the $55,000 loans paid to you in two parts”.
(b)On 4 August 2017 Mr Gunn sent a message to Ms Halloran-Davidson by Facebook Messenger, asking for a repayment plan for the loans.
(c)On 30 August 2017 Mr Gunn sent an email to Ms Halloran-Davidson, copied to Mr Davidson, requesting a repayment plan “for my mothers [sic] personal loans to the Davidsons.”
(d)On 26 July 2018 Ms Bowater’s solicitors wrote to Mr Davidson and Ms Halloran-Davidson demanding repayment of the loans.
[62] In response to these various requests and demands Mr Davidson and Ms Halloran-Davidson initially placated Ms Bowater by saying that they had “never disputed” liability. Then they said that the $50,000 loan was to be repaid from the proceeds of sale of the Castor Bay property – a defence that they have not pursued. Then they said that they would bring a counterclaim that exceeded Ms Bowater’s claim
– a counterclaim that they have not brought.
[63] The one thing that Mr Davidson and Ms Halloran-Davidson did not say, in response to these requests and demands, was that the loans had not been made to them, but rather had been made to HTE Holdings and the Halloran Family Trust. This, which is the defence that they now maintain, is about as simple a defence as one can imagine. It is one that Mr Davidson and Ms Halloran-Davidson would have had no difficulty in articulating. That they did not raise it before Ms Bowater issued her proceeding requires an explanation.
[64] Fourthly, Mr Davidson and Ms Halloran-Davidson have provided no such explanation. They have attempted to explain away their acceptance of the minutes and the statement that they had “never disputed” liability (and I will come to that in a moment). But they do not explain why they did not, in answer to Ms Bowater’s requests and demands, say that they were not the parties who had borrowed money from Ms Bowater.
[65] Fifthly, the only defence raised before the proceeding was issued was the allegation that it had been agreed that the loans would be repaid from the sale proceeds
of the Castor Bay property. This defence was initially pursued by Mr Davidson and Ms Halloran-Davidson in the proceeding. This defence was inherently lacking in credibility. It was inconsistent with the terms of the agreement that the parties signed in respect of the Castor Bay property. It was inconsistent with the minutes of the 11 February 2017 meeting (which recorded that the $50,000 loan was “separate”). It was inconsistent with Ms Halloran-Davidson’s email of 23 February 2017 (confirming the accuracy of the minutes). While they did not pursue this defence in the District Court or on appeal, Mr Davidson and Ms Halloran-Davidson had each been prepared to go on oath and depose that this had been agreed. This casts doubt on the other claims that they made in their affidavits.
[66] Sixthly, a further defence that the appellants raised once the proceeding was issued was that the loan had actually been repaid as a result of a company associated with the appellants having contributed about $60,000 towards the Castor Bay project in 2017. This defence was again inconsistent with the contemporary documents, and had never been raised in response to Ms Bowater’s requests for repayment. The defence was not pursued, but again Mr Davidson and Ms Halloran-Davidson had been prepared to go on oath and depose that the loan had been repaid in this way. This casts further doubt on the other claims they made in their affidavits.
[67] Each of these facts alone might have warranted a robust approach. Their combination leaves no doubt that such an approach is warranted.
Attempts to explain away their acknowledgements of liability
[68] In her initial affidavit Ms Halloran-Davidson denied that “I ever intended to verbally or in writing acknowledge that I was ever personally responsible for any Loans made to HTE Holdings Ltd, and that any use of the word ‘we’ was intended to mean the company”. I do not accept this. The first acknowledgement was in the meeting minutes. HTE Holdings is not mentioned in those minutes. Ms Halloran- Davidson’s email of 6 August 2017 was clear, and again devoid of any reference to HTE Holdings: “Beau and I have never disputed that we owe Sandra the $50,000 that was documented by Mandy in the minutes”.
[69] Ms Halloran-Davidson also said in her initial affidavit that “any statements made by me at the time, were made under duress from either the plaintiff or her son Mr Lee Gunn, for which I am still receiving counselling for [sic]”. This wide-ranging claim was not backed up with any specifics. In her reply affidavit Ms Halloran- Davidson said that she had been suffering significant emotional distress, and that this is what she termed “duress” in her first affidavit. I accept, based on what she has deposed to in her reply affidavit, that it is arguable that Ms Halloran-Davidson found the events of 2017 emotionally distressing. She had health issues at the time, and the Castor Bay property project was not going well, leading to disagreements with her sister. But I do not accept that it is credible that her emotional state caused her to (allegedly incorrectly) acknowledge liability for the loans:
(a)Ms Gunn’s emails to Ms Halloran-Davidson asking her to review the minutes were perfectly amicable. Ms Halloran-Davidson did not respond until ten days after she was first sent the minutes. She therefore had plenty of opportunity, away from any pressure she may have felt at the meeting, to say that she disagreed with the minutes. Her email confirming the minutes does not suggest she was under any pressure.
(b)Ms Halloran-Davidson provided a clear acknowledgement of liability in her email to Mr Gunn on 6 August 2017. This was in response to a message that Mr Gunn had sent by Facebook on 4 August 2017. Mr Gunn’s email message is polite and restrained. Unsurprisingly, Ms Halloran-Davidson’s email response does not suggest that his message put her under any pressure. Her response began: “I hope you and the family are well. Thank you for your message …”.
(c)Ms Halloran-Davidson’s reply affidavit is replete with hyperbole on the alleged pressure that she faced from Mr Gunn. One example will suffice: she claims that Mr Gunn engaged in “cyber bullying” by defriending her on Facebook. She exhibits the message that Mr Gunn sent in which he explained to her that he was closing down his Facebook link with her. Mr Gunn’s message is empathetic and balanced.
[70] Mr Davidson did not object to the minutes. It is clear from his email of 26 February 2017 that he thought Ms Gunn was making good records of the meetings. Nor did Mr Davidson object to Ms Halloran-Davidson’s acknowledgement of liability in her email of 6 August 2017. Mr Davidson does not say that he was under any pressure, let alone duress, in this period.
[71] Mr Davidson’s only explanation of the acknowledgements in his initial affidavit was that “The acknowledgements by the defendants was [sic] made as a royal we.” That tends to confirm liability, not dispute it.
[72] In his reply affidavit Mr Davidson deposed that at no time had he agreed any of the meeting minutes to have been a “true and correct record”. This is just playing with words. Ms Halloran-Davidson’s email of 23 February 2017, stating that she and Mr Davidson agreed that the minutes “are an accurate record”, was copied to Mr Davidson. Mr Davidson did not object to Ms Halloran-Davidson’s email. A few days later, after Ms Gunn had emailed minutes for a further meeting held on 26 February 2017, Mr Davidson said that Ms Gunn’s minutes were “Again a good record”, and he asked for one specific correction. At no time did Mr Davidson dispute the accuracy of the 11 February 2017 minutes – not even after a copy was sent to him with Ms Bowater’s solicitor’s letter of demand.
[73] I now turn to consider the evidence that Mr Davidson and Ms Halloran- Davidson rely on for their argument that Ms Bowater did not establish that they had no defence.
The evidence of loans to HTE Holdings
[74] The appellants, in arguing that the loans were to HTE Holdings, rather than to themselves personally, placed emphasis on two matters.
[75] The first was that Ms Bowater had paid the loans of $50,000 and $4,100 to HTE Holdings, rather than to Mr Davidson or Ms Halloran-Davidson. She paid the initial loan of $50,000, at Mr Davidson’s direction, to Lunn & Associates. Mr Davidson’s reply affidavit annexed an email from Mr Morgan, a director of Lunn & Associates, saying that the $50,000 had been received and held by HTE Holdings.
Ms Bowater paid the later loan of $4,100, again at Mr Davidson’s direction, to HTE Holdings.
[76] The second matter was that, at least for the $50,000 loan, Ms Bowater knew that the $50,000 was to be used by HTE Holdings to purchase the computers.
[77] Ms Smith submitted that in each instance the transaction was quite simple: Mr Davidson requested a loan to HTE Holdings, and Ms Bowater obliged.
[78] I do not accept that the analysis is that simple. There are two possibilities. The first is that Ms Bowater agreed to lend the money to Mr Davidson and Ms Halloran- Davidson, who directed that she pay the money to HTE Holdings. In that case Mr Davidson and Ms Halloran-Davidson are Ms Bowater’s debtors (and HTE Holdings would likewise be their debtor). The second is that Ms Bowater agreed (at Mr Davidson and Ms Halloran-Davidson’s request) to lend the money to HTE Holdings. In that case HTE Holdings is Ms Bowater’s debtor.
[79] The mere fact that HTE Holdings was the recipient of the funds is neutral as between those possibilities. Mr Morgan’s email is likewise neutral, as it is equally consistent with both possibilities.
[80] The appellants also relied on an affidavit from Mr Taylor, who was the director of HTE Holdings at the relevant times. Mr Taylor deposed that he would from time to time authorise Mr Davidson to act as an agent for HTE Holdings, and that in February 2015 Mr Davidson “was authorised by HTE Holdings to arrange private funds from his Sister-in-law Sandra Bowater as a company loan”. He deposed that he understood the advance from Ms Bowater “to be a company loan for the benefit of the company”.
[81] Mr Taylor’s affidavit is neutral between the two possibilities that I have identified. That is because it is consistent with Mr Davidson being authorised to personally borrow money from Ms Bowater which he would then lend to HTE Holdings. Mr Taylor does not depose to any knowledge of what Mr Davidson said to
Ms Bowater. Mr Taylor therefore cannot say, and does not say, whether Ms Bowater agreed to lend money directly to HTE Holdings.
[82] If the loan had been directly from Ms Bowater to HTE Holdings, one would have expected some documentary evidence of the loan. This would have been a commercial loan, rather than an inter-family loan. Commercial loans are normally documented, and there is normally agreement on terms such as interest and repayment dates. Here there is no loan agreement, and no party says that there was ever any discussion of interest or of repayment dates. There is not even a written acknowledgement by HTE Holdings of the loan. There are no internal accounting records from HTE Holdings showing that Ms Bowater was a creditor of the company. Mr Davidson is now a director of HTE Holdings, and had every opportunity to produce such evidence if it existed. In my view Judge Harrison was right to comment that “not a shred of paper was produced which recorded any loan to the company”.17
[83] The lack of such documentation makes it inherently unlikely that Ms Bowater loaned money to the company, as opposed to loaning money to the appellants. In itself this would not normally be enough to conclude that the appellants have no arguable defence. But, when coupled with all the circumstances that I have set out in the previous section (such as their acknowledgements of liability, and their failure to raise this defence in response to requests for payment), I find that their defence is not credible.
[84] Finally, the appellants relied on affidavits from Ms Jonker (who had been Ms Halloran-Davidson’s support person at the 11 February 2017 meeting) and a Mr Parry (who had been a director of HTE Holdings until March 2014). Ms Jonker said that at the 11 February 2017 meeting there was discussion of a loan of $50,000 to HTE Holdings, and that her understanding from those discussion was that the loan was to be repaid from the proceeds of sale of the Castor Bay property. Mr Parry said that his understanding was that the Davidsons’ share of the profits from the Castor Bay project was to be “used to pay back [Ms Bowater’s] loan to HTE Holdings Ltd”. Mr Parry did not explain the basis for his understanding.
17 Bowater v Davidson [2019] NZDC 17144 at [14].
[85] Ms Jonker’s and Mr Parry’s understandings of the transaction do not affect the conclusion that I have reached. Neither had personal knowledge of the transaction. Their evidence does not explain why there is no documentation supporting there being a loan from Ms Bowater to HTE Holdings. Nor does it provide any explanation for Mr Davidson and Ms Halloran-Davidson’s acknowledgements of liability or for their failure to raise their defence when Ms Bowater requested repayment from them.
The evidence of a loan to the Halloran Family Trust
[86] The position with respect to the $900 loan is similar. The appellants relied on the fact that Ms Bowater paid this money directly to the Halloran Family Trust. But that is consistent with a loan to Mr Davidson and Ms Halloran-Davidson, the loan advance having been paid as they directed. At no point prior to the proceeding being issued did the appellants say that the Trust was the debtor. I find that this defence is not credible.
Quantum
[87] In the District Court the appellants did not dispute quantum. On appeal, however, there was a suggestion that, if the appellants were liable for the loan, it was not for the full amount claimed. This was on the basis of an email from Mr Morgan to Mr Davidson dated 12 April 2019, which Mr Davidson exhibited to his affidavit in reply.
[88] Mr Morgan’s email said that Ms Bowater had made two payments to Lunn & Associates on 27 February 2015: one of $50,000 (the subject of the proceeding) and one of $95,000. The email said that $99,877.33 had been repaid to Ms Bowater on 2 April 2015. The appellants said, on the basis of this email, that $4,877.33 of the
$50,000 loan had been repaid.
[89] I do not find this defence to be credible. It is a defence that the appellants have raised at the last minute. In none of their earlier communications have they suggested that the loan was partly repaid, and the appellants have produced no direct evidence (such as bank statements) of part repayment. Moreover, this new defence is inconsistent with what Mr Davidson said in his initial affidavit: Mr Davidson deposed
that Ms Bowater had made two payments to Lunn & Associates, and that the larger of those payments (but no more) had been returned to Ms Bowater.
[90] This is not to suggest that Mr Morgan’s email is unreliable. But he was simply relaying a conversation that he had had with Ms Bowater. Mr Morgan was not reporting on the state of the account as between the appellants and Ms Bowater.
Conclusion
[91] Even if the late reply affidavits from the appellants were to be admitted, I would agree with Judge Harrison’s decision that Ms Bowater showed that the appellants had no defence to her claim.
Result
[92]The appeal is dismissed.
Costs
[93] In a judgment dated 16 June 2020 Powell J reserved costs on earlier appeal (CIV-2019-404-2083) and on the appellants’ application in the present appeal for an extension of time to appeal, pending determination of the substantive outcome of the present appeal.
[94]In light of the outcome of this appeal:
(a)Ms Bowater is entitled to costs on this appeal, including in respect of the appellants’ application for an extension of time. I allow for second counsel for the hearing of this appeal on 13 August 2020.
(b)Ms Bowater is entitled to costs on the earlier appeal in CIV-2019-404- 2083.
[95] Counsel should be able to agree costs. If they cannot, the respondent may file and serve submissions of no more than three pages by 18 September 2020, the
appellants to respond within five working days, again with submissions of no more than three pages.
Campbell J
0
0
1