De Lage Landen Limited v Crafar
[2017] NZHC 1419
•26 June 2017
IN THE HIGH COURT OF NEW ZEALAND
ROTORUA REGISTRY
CIV-2016-463-000140
[2017] NZHC 1419
BETWEEN DE LAGE LANDEN LIMITED
Plaintiff
AND
ALLAN JOHN CRAFAR
First Defendant
AND
FRANK ROBERT CRAFAR
Second Defendant
AND
ELIZABETH JEAN CRAFAR
Third Defendant
Hearing: 22 March 2017 Appearances:
S D Campbell for the Plaintiff First Defendant in Person Second Defendant in Person Third Defendant in Person
Judgment:
26 June 2017
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 26 June 2017 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
DE LAGE LANDEN LTD v CRAFAR [2017] NZHC 1419 [26 June 2017]
Wynn Williams, Christchurch
Introduction
[1] The Crafar family are farmers in Reporoa. Allan and Frank Crafar are brothers. Elizabeth is Allan’s wife. All three were the directors of Plateau Farms Limited, before that company went in liquidation in 2011.
[2] De Lage Landen (DLL) is a company in the business, among other things, of providing asset financing and leasing equipment to manufacturers, dealers and distributors. The parties entered into six agreements under which DLL leased equipment PLF. One or more of the Crafars provided personal guarantees of each of these agreements.
[3] DLL brought proceedings in the District Court against the Crafars on the basis of these personal guarantees. After considerable delay and procedural irregularities (on the part of the Crafars), the Crafars filed a counterclaim and an application to transfer the proceedings to the High Court. This was only seven days before the matter went to trial. The Crafars were given leave to file their counterclaim and an order was made transferring the proceedings to this court by consent.
[4] DLL is anxious to press ahead with its claim. In its view, the counterclaim is vexatious and devoid of merit. It applies to strike out the counterclaim. In the alternative, if the counterclaim is not struck out, DLL asks for security for costs in the sum of $40,000. Allan Crafar opposes the application.
[5] The parties have agreed that for the purposes of this application, Allan Crafar is representative of the other two Crafars. This is recorded in the court's minute of 24 February 2017.
[6] For the reasons that follow, I am satisfied that the counterclaim should be struck out; there is therefore no reason to address the alternative issue of security for costs.
The factual basis of the counterclaim
[7] The background to Allan’s complaints is not in dispute. Plateau Farms was placed into receivership by Westpac New Zealand Limited on 5 October 2009. Then, on 9 February 2011, Plateau Farms was placed into liquidation by the Commissioner of Inland Revenue.
[8] In July 2011, DLL and the liquidator of Plateau Farms agreed that the six agreements should be terminated, on the basis that Plateau Farms had been placed into liquidation and could no longer meet its repayment obligations. Four were terminated on 6 July 2011, and the equipment returned; the remaining two were terminated on 20 July 2011 and the equipment repossessed on the same day.
[9] DLL sold the items of machinery on 14 June 2012. After sale, there remained a shortfall in principal sum of $98,703.23. The next day, DLL sent a notice of demand to each of the defendants seeking payment of the principal, together with interest.
[10] Allan’s complaints relate to different stages of this process: it is alleged that DLL failed to serve him with pre-possession or pre-sale notices; wrongfully repossessed, failed to adequately maintain the machinery, and finally, failed to secure the best possible price through the sale.
No reasonably arguable cause of action
[11] DLL’s primary ground is that Allan’s counterclaim discloses no reasonably arguable cause of action.1 I am persuaded that this is so, and that each cause of action is clearly untenable.
[12] In reaching that conclusion, I assume that the pleaded facts, whether admitted or not, are true. I am also mindful that the jurisdiction to strike out should be exercised sparingly and only in clear cases.2
1 High Court Rule 15.1(a).
2 Attorney-General v Price [1998] 1 NZLR 262 (CA) at 267, affirmed in Couch v Attorney-General
[2008] NZSC 45, [2008] 3 NZLR 725 at [33].
[13]Allan advances four causes of actions which can summarised as follows:
(a)First, DLL breached contractual or statutory obligations owed to Allan as a guarantor to serve documents on him pertaining to the financing of the security interest that they were acting as guarantors for.
(b)Second, DLL breached its contractual or statutory obligations by repossessing 6 items of farm machinery.
(c)Third, DLL breached s 110 of the Personal Properties Securities Act 1999 by failing to secure the best possible price for the items of machinery after executing repossession. The claim is that Allan could have made profit from the farm machinery.
(d)Fourth, DLL breached a duty of care owed to Allan to ensure that the Crafar’s equity in the 6 items of farm machinery was not lost or dissolved through negligence or disregard.
[14] The pleadings are prolix and often confusing to follow; but the court will go to some lengths to see pleadings in the best possible light when brought by litigants without access to legal counsel. Nonetheless, even on their most sympathetic reading, I do not consider these causes of action are reasonably arguable. I proceed in reverse order.
[15] The fourth cause of action essentially claims that between the occurrence of receivership and the termination of the various agreements, the receivers failed to adequately maintain the machinery, resulting in a deterioration of the machines’ aesthetics and reliability. However, Allan falsely assumes that the role of the receiver is the same as or even equivalent to DLL as creditor. I do not see how that can be the case, and that being so, I do not see why DLL would owe Allan any duty of care in this regard. Even if the receiver was proved negligent, I cannot see any causal connection between the receiver and DLL.
[16] The third cause of action must fail for the same reason. Section 110 provides that a secured party selling collateral has a duty to obtain the best price reasonably obtainable. It is not a duty incumbent on DLL.
[17] The first and second causes of actions rely on obligations that DLL allegedly owes Allan. These contractual or statutory obligations are said to be owed pursuant to the various contracts; the Personal Property and Securities Act 1999 (PPSA); or the Credit (Repossessions) Act 1997.
[18] Allan does not point to specific provisions of the contractual documents that he relies upon, and on a scan of the material I cannot see any grounds for thinking the DLL owes such an obligation.
[19] In terms of statutory obligations, once again no provision is referred to. I can only assume he is relying on s 114 of the PPSA. The PPSA does not impose an obligation to provide a pre-possession notice; s 109 entitles possession without notice. Only pre-sale notice is required pursuant to s 144.
[20] Section 114 provides, roughly, that a secured party who intends to sell collateral must, not less than 10 working days before selling the collateral, give notice to certain persons. These persons include: debtors; persons who have registered a financing statement in respect of the collateral effective at the relevant time; or persons that have given the secured party notice that they claim an interest in the collateral. It is clear on the face of the agreements, however, that pursuant to s 107, Allan has contracted out of the right to receive notice of sale. Nor is there are any independent right for guarantors or covenantors to receive notice.
[21]I am satisfied that the causes of actions must also fail.
Result
[22]The counterclaim is accordingly struck out.
[23] I note that I have carefully considered whether to issue this decision on an interim basis to give the Crafars further opportunity to file an amended counterclaim.
However, it appears to me that the counterclaim cannot be cured in this way; the problems are not cosmetic but go to the heart of the Crafars’ complaints. I am persuaded that the counterclaim discloses no tenable cause of action. Moreover, I am conscious that there is another party involved in this litigation, and DLL has already been subject to considerable prejudice as a result of the Crafars’ ongoing misuse of the Court’s processes.
[24] However, if the Crafars are aggrieved by this decision, they retain the right to apply for a review of the decision by the High Court under s 26P of the Judicature Act 1908.3 If they take this route, they are advised to seek legal counsel and consider carefully whether there is any merit in continuing this litigation any longer.
[25] As costs follow the event under the statutory regime, I make an order for costs on a 2B basis plus disbursements as fixed by the Registrar. The Registrar is to place DLL’s claim in the Duty Judge list for further directions.
Associate Judge Sargisson
3 Effective pursuant to the transitional provision in cl 11 of Schedule 5 to the Senior Courts Act 2016.