De Lage Landen Limited v Crafar
[2017] NZHC 2709
•8 November 2017
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-Ā-KAHU ROHE
CIV-2016-463-000140 [2017] NZHC 2709
BETWEEN DE LAGE LANDEN LIMITED
Plaintiff
AND
ALLAN JOHN CRAFAR First Defendant
FRANK JOHN CRAFAR Second Defendant
ELIZABETH JEAN CRAFAR Third Defendant
Hearing: 19 October 2017 Appearances:
S D Campbell for Appellant
A Crafar for Defendants, in personJudgment:
8 November 2017
JUDGMENT OF JAGOSE J
This judgment is delivered by me on 8 November 2017 at 11.00 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors:
Wynn Williams, Christchurch
And to:
The Defendants
DE LAGE LANDEN LIMITED v CRAFAR & ORS [2017] NZHC 2709 [8 November 2017]
Introduction
[1] The defendants – brothers Allan and Frank Crafar, and Allan’s wife, Elizabeth Crafar (the “Crafars”) – were directors of Plateau Farms Limited (“PFL”).
[2] PFL entered into farm equipment leasing and hire purchase agreements with the plaintiff, De Lage Landen Ltd (“DLL”). Performance of PFL’s obligations under the agreement was secured by guarantees from the Crafars.
[3] On PFL’s alleged failure to perform its obligations under the agreements, DLL now seeks to enforce guarantees provided by the Crafars, claiming $98,703.23 plus interest from July 2011.
[4] The Crafars originally responded to the claim with a defence and counterclaim. The counterclaim was struck out by Associate Judge Sargisson.1 In conjunction with the trial (and before determination) of DLL’s claim, the Crafars seek review of Associate Judge Sargisson’s decision.
[5] Two days before hearing, the Crafars purported to file an amended
counterclaim. They also sought a ‘McKenzie friend’ to assist them in the proceeding.
McKenzie friend
[6] Allan Crafar – who made oral submissions at the hearing, also on behalf of his brother and wife – sought leave to be assisted by one Ashley Palmer, as the Crafars’ ‘McKenzie friend’.
[7] A ‘McKenzie friend’ is:2
… a support person who may attend as a friend and sit beside an unrepresented party to civil litigation to provide support, take notes, make suggestions and give advice. A McKenzie friend does not have the right to take part in the proceedings as an advocate, although the Court has a
1 De Lage Landen Ltd v Crafar [2017] NZHC 1419.
2 Craig v Slater [2017] NZHC 874, [2017] NZAR 649 at [2], omitting its footnoted reference to
Mihaka v Police [1981] 1 NZLR 54 (HC) and McKenzie v McKenzie [1970] 3 WLR 472 (CA).
discretion to allow the friend to play a greater role, such as speaking for the party, if that is thought appropriate. That discretion is exercised sparingly.
[8] I asked Mr Crafar whether Mr Palmer had assisted him in the drafting of the
Crafars’ amended counterclaim and synopsis of submissions. Mr Crafar said he had.
[9] I had earlier considered both documents, neither of which showed signs of relevant focus or legal competence. I decided Mr Palmer’s assistance was not likely to be constructive, and refused leave for his attendance.
Review of Associate Judge Sargisson’s decision
[10] Associate Judge Sargisson held the Crafars’ counterclaim disclosed no
reasonably arguable cause of action, and was struck out accordingly.
[11] The counterclaim’s four causes of action were each grounded in the Crafars’ objection to aspects of the process by which DLL claimed on their guarantees. The Crafars alleged DLL breached various contractual and statutory obligations; the Associate Judge held none, if they existed at all, were obligations incumbent on DLL, or owed to the Crafars, either at all or in any event as guarantors.
[12] Because the proceeding commenced prior to 1 March 2017, the former High Court Rule 2.3, providing the only method of challenging a decision of an Associate Judge in chambers, continues to apply.3 A strike out application is heard in chambers, unless the judge otherwise directs. There is no suggestion Associate Judge Sargisson so directed. Her decision is reasoned, after a defended hearing.
[13] On review of the Associate Judge’s decision, my approach is essentially appellate. The Crafars have the burden of persuading me the Associate Judge was wrong – that she relied on unsupportable findings, and/or applied wrong principles of law. I am only justified in interfering with her decision if I consider it is wrong4,
which involves me making my own assessment on the merits of the case.5
3 Senior Courts Act 2016, Schedule 5 (cl 11).
4 Austin, Nicholls & Co Inc v Stitchting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
5 Burmeister v O’Brien [2008] 3 NZLR 842, (2009) 9 NZBLC 102,415 (HC) at [29].
[14] The Crafars essentially contend the Associate Judge was wrong because she did not accept their view of the law. However, her view is both orthodox and correct. She correctly held DLL had no relevant obligations to the Crafars: it was not liable to provide any information to the Crafars; owed the Crafars no duty of care comparable to that of receivers’ obligations to preserve; and was not liable to the Crafars for any contended failing on the part of the receivers.
[15] The Crafars’ contentions to the contrary are reliant on perverse propositions of law – for example, unless the Crafars were given notice of the agreements’ continuation, DLL’s agreements with PFL terminated on the receiver’s appointment; and the agreements’ heavy farming machinery constitutes ‘consumer goods’ (“goods that are used or acquired for use primarily for personal, domestic, or household purposes”) for the purposes of the repealed Credit (Repossession) Act 1997. None shows any error in the Associate Judge’s decision.
[16] The Crafars’ application for review of Associate Judge Sargisson’s decision is
dismissed.
Amended counterclaim
[17] Rule 7.7 of the High Court Rules prohibits filing of an amending pleading “after the close of pleadings date without the leave of a judge”. Rule 7.6(4A) provides the close of pleadings date is the later of either 60 working days before the trial date, or the date on which the trial date was allocated. The Crafars’ amended counterclaim required leave for its filing two days before hearing of the plaintiff’s claim.
[18] Leave requires the Crafars to show filing the amended counterclaim would be in the interests of justice, and will not significantly prejudice other parties, or cause significant delay.6
[19] The amended counterclaim has expanded to thirteen causes of action, alleging DLL’s misrepresentations in relation to each of the six agreements, and
6 Elders Pastoral v Marr (1987) 2 PRNZ 383 (CA) at 385, applied in Body Corporate 172108 v
Gundry [2014] NZHC 954 at [40].
DLL’s non-disclosure in relation to five of the agreements, as well as repeating the struck out counterclaim’s first cause of action, already determined not reasonably arguable. None of the misrepresentations is supported by the Crafars’ proposed briefs of evidence (ultimately, by consent, taken as read).
[20] The counterclaim can be pursued by the Crafars in a separate proceeding, if they wish to do so, although it risks the same strike out result. There is no interest of justice served by retaining it for determination in this proceeding. To do so would be to DLL’s significant prejudice, in that DLL has no opportunity to respond to the counterclaim’s allegations and any evidence tendered in support of them, at least not without significant delay in hearing of its own claim.
[21] I refused the Crafars leave to file the amended counterclaim.
DLL’s claim
[22] DLL’s claim is relatively straightforward.
Facts
[23] On 5 August 2008, PFL sought DLL’s financing of its lease-to-buy two 2008
Keenan 140BH mixer wagons, two 2008 Keenan 200BH mixer wagons, and one
2008 Keenan 280BH mixer wagon from Rakaia Engineering, ranging in GST exclusive price from $81,000 to $131,000, at an interest rate of 10.4 per cent per annum. On 20 October 2008, PFL sought DLL’s financing of its hire purchase of a
2008 JCB Fastrac 3230 tractor from Landpower Bay of Plenty, at the GST exclusive price from $223,000, at an interest rate of 10.4 per cent per annum.
[24] The documentation involved PFL making a financing proposal to DLL. The August 2008 proposals were signed by Allan and Frank Crafar, and the October 2008 proposal was signed by Allan and Elizabeth Crafar, each as directors of PFL. Each proposal identified the three Crafars as “Partners/Directors (Guarantors)”.
[25] The proposals were each made on DLL’s respective lease and hire purchase
standard terms. The Crafars acknowledged in signing the proposals they had
received and had opportunity to read a copy of the standard terms. A binding contract was formed in terms of each proposal on DLL’s acceptance of it, which occurred on dates in August and October 2008.
[26] The contracts each obliged PFL not to become insolvent – relevantly and specifically, not to become “in receivership” or “in liquidation”. In such event the contracts entitled DLL to “terminate the agreement by notice to you”, such then requiring PFL to return the equipment and pay DLL “the termination value for all the goods under this agreement… as liquidated damages for [DLL’s] loss of bargain”. The Crafars guaranteed DLL they would pay any amount PFL did not pay when due.
[27] PFL was placed into receivership by Westpac New Zealand Limited on
5 October 2009, and into liquidation on 8 February 2011 on application of the Commissioner of Inland Revenue. The receivers were Michael Stiassny and Brendon Gibson of KordaMentha. The Official Assignee was appointed liquidator, and consented to the receivers acting as PFL’s agent.
Notice(s) of termination
[28] DLL’s senior portfolio administration officer, Peter Piccoli, gave evidence
(albeit based on DLL’s documents):
(a) on 6 July 2011, DLL and the liquidator agreed four of the leases should be terminated and the equipment returned to DLL, as PFL had been placed into liquidation and could no longer meet its repayment obligations; and
(b) DLL terminated the fifth lease and the hire purchase agreement on
20 July 2011, as PFL had been placed into liquidation, and repossessed the mixer wagon and tractor that same day.
[29] There is no evidence of any notice of termination. Neither is it contended notice of termination was given. Nor was the giving of notice pleaded. The Crafars responded to DLL’s allegations it terminated the agreements by saying they “have no
knowledge”, putting DLL clearly to proof of the relevant elements to establish termination.
[30] Indeed, the Crafars vehemently dispute receiving any notice of termination, although Allan Crafar acknowledged in response to my questions any such notice was to be given to PFL, rather than to the Crafars personally. Once in liquidation, obviously, any notice for PFL would be given effectively to the liquidator.
[31] I infer, from evidence of agreement between DLL and the liquidator, either DLL gave notice of termination to the liquidator (as PFL), or the liquidator waived its receipt in relation to the four mixer wagon leases. In either respect, it was effective to terminate the four mixer wagon leases to PFL, with the contractual consequence PFL was obliged to pay the termination values of the four mixer wagon leases to PFL.
[32] I am not prepared to make such an inference in relation to the other mixer wagon lease or the tractor hire purchase agreement. Mr Piccoli clearly distinguishes termination of those transactions from those terminated by agreement. The distinction is not explained; neither is the later timing of those purported terminations. Absent PFL’s agreement or waiver to the contrary, DLL could only have terminated those transactions by giving notice in writing to PFL (in liquidation). And there is no evidence of that at all.
[33] I pause to note I am not finding DLL failed to give notice of termination in relation to the other mixer wagon lease or the tractor hire purchase agreement. It may well have done. It just has not evidenced that in this proceeding. In this proceeding, DLL has not established the foundation for PFL’s obligation to pay the termination value of the other mixer wagon lease or the tractor hire purchase agreement.
Crafars’ liability to DLL
[34] The termination values of the four mixer wagon leases at 6 July 2011 amounted to $235,363.59. DLL sold the four returned mixer wagons for
$200,500.00, leaving a total of $34,863.59 owing in principal. By letter of 14 June
2012, DLL issued notices of demand to each Allan and Frank Crafar, specifying the
amounts then due under each lease and the hire purchase agreement, including interest, totalling $106,113.29. The contracts require notices to be sent to guarantors’ notified addresses, which they were. The Crafars did not respond to or pay on the demands.
[35] Allan Crafar, speaking on behalf also of Frank and Elizabeth, acknowledged in response to my questions PFL, through its directors, entered the five leases and the hire purchase agreement. He accepted the result was he, Frank, and Elizabeth risked being called on their guarantees, as has occurred.
[36] The Crafars instead raised “affirmative defences” – first, a settlement deed was effective to release them from liability to DLL; next, DLL had not made a claim in PFL’s liquidation; and last, Elizabeth Crafar had not executed any guarantee.
[37] The settlement deed referred to is one dated 23 June 2011 between PFL, the receivers (as agents of PFL), and the Crafars (and a number of their extended family). Under its provisions, the Crafars agree “to withdraw from and discontinue all current litigation and waive all rights to future litigation against”, among others, “Rabobank Limited”. DLL shares the same ultimate parent company as Rabobank New Zealand Limited. The Crafars say this combination releases them of liability to DLL.
[38] However, even if Rabobank New Zealand Limited is the ‘Rabobank Limited’ named in the deed (which is uncertain), and even if it is liable to bear the burden of a contract to which it is not party (which is unlikely, absent its express consent), and even if that burden extends to DLL by reason of their common parent (which has no foundation in law at all), the deed does not provide for DLL’s reciprocal withdrawal, discontinuance and waiver of litigation against the Crafars.
[39] Next, DLL was entirely free to choose whether to claim in PFL’s liquidation. That it chose not to do so, as an unsecured creditor holding separate guarantees, does not disqualify its claim under the guarantees.7
[40] Last, the evidence is clear Elizabeth Crafar signed the hire purchase agreement as PFL’s director. That agreement provided she guaranteed PFL’s payments under any agreement between DLL and PFL “even though the guarantor may not have signed the relevant agreement”. And, regardless of her signature to that agreement, she was also proffered to DLL as guarantor under the other leases in her role as PFL’s director, and that was done by Allan and Frank Crafar under their apparent authority as PFL’s directors. She may be prohibited from asserting against DLL Allan and Frank lacked authority to commit her, as director, to guarantee performance of PFL’s obligations.8 Any complaint she has about that liability would be with her fellow directors, not DLL.
[41] I find, under their respective guarantees derived from all six contracts, the Crafars are liable to pay DLL $34,863.59 owing under the four mixer wagon leases (the “judgment sum”), plus interest calculated on that sum to the date of payment.
[42] Under the leases, DLL is entitled to charge PFL interest at the rate of “5% per annum above our cost of funding” (which the Crafars are then required to pay if PFL does not when due). Given the complexity in calculating that daily cost, DLL contents itself here with an interest claim at the rate of 5 per cent per annum. Coincidentally, that is also the presently applicable prescribed rate of interest under s 87 of the Judicature Act 1908.
[43] I find the Crafars are liable to pay interest on the judgment sum for the period from 14 June 2012 until payment at the rate of 5 per cent per annum.
Costs
[44] Costs are usually payable by the unsuccessful party in proceedings, in an amount reflective of the other party’s success. In this proceeding, DLL has only been successful on about one-third of its total claim in dollar terms (although two-thirds in contract terms). Scale costs might be discounted accordingly.
[45] However, under the contracts, each guarantor “separately and independently indemnifies us against loss or costs we suffer or incur if… the customer does not, … or is unable to, pay us in accordance with this agreement”. ‘Costs’ includes “costs, charges and expenses in connection with legal and other advisers”.
[46] Under the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, DLL is entitled to incur charges and expenses from its lawyers that are no more than “fair and reasonable for the services provided, having regard to the interests of both client and lawyer and having regard also to the factors set out in rule 9.1”.
[47] Absent complaint from DLL, I accept the $45,723.50 in fees and $6,769.81 in disbursements incurred by DLL to 30 September 2017 are fair and reasonable as described in the Rules, notwithstanding the fees alone exceed the judgment sum by a margin and reflect to some degree expenditure of effort on unsuccessful claims. I take into account the procedural chronology of this proceeding since its initial filing in the District Court at Rotorua on 13 March 2015, by which the Crafars have taken every opportunity to enlarge the proceeding on specious grounds, while failing to abide by the Court’s orders for the proceeding’s efficient dispatch. Particularly given the Crafars’ indemnity of DLL, they bore the risk of any unnecessary legal expenditure.
[48] I find the Crafars are liable under the contracts to pay DLL $52,493.31 in fees and disbursements invoiced to DLL to 30 September 2017,9 and DLL’s fair and reasonable charges and expenses incurred thereafter to the date of this judgment as
certified by the Registrar.
9 The sum of costs sought by DLL appears to include some uplift on the specified fees and disbursements, to arrive at the claimed higher total of $56,845.29. If the uplift is some form of uniform ‘service charge’ rendered by DLL’s solicitors, that is not recoverable as a disbursement: Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 2702 at [7]. But some of the uplifts appear larger than likely contributed by such a charge – eg, March 2016’s invoiced
$2,891.50 fee with no disbursements results in a $3,458.23 total; September 2016’s invoiced
$1,200.00 fee with no disbursements results in a $2,342.20 total. In the end, I do not know the foundation for the uplift and therefore disallow it.
Result
[49] The Crafars are jointly and severally liable to pay DLL: (a) $34,863.59;
(b)interest on that sum for the period from 6 July 2011 to the date of payment, calculated at the rate of 5 per cent per annum; and
(c) costs in the amount of $52,493.31 to 30 September 2017, and such fair and reasonable costs incurred by DLL thereafter to the date of this judgment as certified by the Registrar.
—Jagose J
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