Debt Buyers Limited v Schutt

[2016] NZHC 3166

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002883 [2016] NZHC 3166

BETWEEN

DEBT BUYERS LIMITED

Plaintiff

AND

KARL SCHUTT Defendant

Hearing:	23 August 2016
Appearances:	A Ho for Plaintiff M Donovan for Defendant
Judgment:	20 December 2016

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 20 December 2016 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Debt Buyers, Auckland
Graeme Skeates Law, Auckland

M Donovan, Auckland

DEBT BUYERS LTD v SCHUTT [2016] NZHC 3166 [20 December 2016]

Introduction

[1]      The plaintiff, Debt Buyers Limited (DBL), claims summary judgment for the full  amount  of  its  claim  of  $269,704.01,  interest  and  costs.    The  defendant, Mr Schutt, opposes summary judgment on the grounds that he has arguable defences, principally including waiver and promissory estoppel.

Principles on summary judgment applications

[2]      In order to succeed at the summary judgment stage, DBL must demonstrate that Mr Schutt has no arguable defence to the cause of action.  The Court must be left without any real doubt or uncertainty on the matter.1    However, the Court will not hesitate to decide questions of law where appropriate.2

Background

[3]      Mr   Schutt   borrowed    a   $527,220.00    off   a   finance   company   on

20 December 2006.   As security he offered a property in Hunua, Auckland.   He defaulted on the repayments of the loans, and the debt ultimately became due on

7 June 2008.   The nominee under the mortgage exercised its rights and sold the Hunua property, the proceeds of which were put towards repayment of the loan. There was a shortfall of $269,704.01 (the remaining debt).

[4]      Mr Schutt entered into a settlement agreement with the finance company on

7  December  2009  (the  agreement).    This  provided  that  Mr  Schutt  would  pay

$51,000.00 in full and final settlement of the debt as follows:

(a)       Weekly payments of $100.00 commencing 15 January 2010 payable on a weekly basis over 5 years;

(b)      If, at any time, the total sum repaid is less than a total equivalent to

$5,200 per annum, for the number of months since January 2010, it will be considered a breach of this arrangement. At that point the total

1      Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.

2      At 4.

shortfall  outstanding,  plus  accrued  interest  would  again  become repayable in full immediately (the default clause).

[5]      The rights under the agreement are now held by the plaintiff DBL, following assignment.3    It seeks repayment of the remaining debt, interest and costs.

[6]      Mr Schutt has failed to comply with the agreement.  He does not dispute this; in fact he relies on his persistent history of failing to comply with the agreement in support of his defence of estoppel or waiver by the plaintiff.

Issues to be determined

[7]      The crux of the dispute between Debt Buyers and Mr Schutt is:

(a)       Whether  breach  of  the  agreement  results  in  the  full  original  debt becoming payable; and

(b)      Whether DBL’s failure to enforce the contract earlier amounts to a

waiver or should be prohibited by equitable principles of estoppel.

Breach of the settlement agreement

[8]      Mr Schutt submits that the most that could be owed now is the remainder of the $51,000.00 being the sum accepted under the agreement as full and final settlement.  DBL say because the default clause in the agreement states that the “total shortfall outstanding” becomes payable on default of annual payments, the full original debt of $269,704.00 is now owing.   That is premised on “total shortfall outstanding” being a reference back to the debt owed by Mr Schutt after the mortgagee sale proceeds were applied.

[9]      This is a contractual interpretation issue.  I find that the agreement did intend to refer back to the original debt of $269,704.00. That is for the following reasons:

3      NZ Guardian assigned all its rights title and interest in the loan agreements to Property Finance Securities Limited (PFS) and on 29 August 2014 PFS assigned all its rights title and interest in the loan agreements to the plaintiff, Debt Buyers Ltd.

(a)      The plain meaning of the words “total shortfall outstanding” indicates that the “total shortfall outstanding” is not the restructured amount, arrived at by compromise, but the original debt which was the origin of the need to enter into the agreement.

(b)      In  context,  the agreement  was  intended  to  restructure the  debt  of

$269,704.00 into a lump sum, repayable in weekly amounts totalling not less than $5,200 per annum. In that context, failure to adhere to the repayment schedule was necessarily breach of an essential term between the parties, the result of which should logically be the reinstatement of the prior position between the parties.

(c)      Mr  Schutt  accepted  in  his  affidavit  dated  9  May  2016  that  the “shortfall” of $269,707.01 would not be sought on the basis that the repayment schedule was met, indicating his understanding of the agreement.

[10]     For those reasons, I find that as a matter of law, any breach of the default clause  would  result  in  the  “shortfall”  of  $269,707.01  becoming  payable  in accordance with the agreement.

Has DBL failed to enforce its contractual rights?

[11]     However, I find that there is an arguable defence made out in terms of alleged waiver and or issue estoppel.   It has been acknowledged in New Zealand jurisprudence that equitable estoppel and contractual waiver are virtually identical doctrines.4   Invoking the doctrines broadly requires:5

(a)       A clear, unequivocal representation, which may be done by conduct.6

(b)      Reliance on such representation.

4      Boviard v Brown [1975] 2 NZLR 694 at 700; Burrows, Finn & Todd Law of Contract in New

Zealand at 749.

5      Burrows, Finn & Todd Law of Contract in New Zealand at 749 – 751.

6      Neylon v Dickens [1978] 2 NZLR 35 (PC).

years of the agreement. From 2010 to 2014 he made payments that did not reach

$5,200 in total per annum.   He was not penalised nor ordered to make repayment immediately. He argues therefore that DBT cannot now insist on activating that clause and seek repayment when he relied on the fact that they would not, when organising his  personal  finances. These  circumstances,  he deposes, were due to extraordinarily tragic person circumstances that were communicated to the various individuals involved.

[13]     There is evidence of a failure to enforce the terms of the agreement over a long period of time, and evidence of communication from Mr Schutt as to the reasons for that failure to meet the schedule.  Mr Schutt deposes in his 9 May 2016 affidavit that he was given debt relief in 2011 following the Christchurch earthquake by a representative from SSL for a period of about six months on an informal basis. In his affidavit dated 26 July 2016 Mr Khov (on behalf of the plaintiffs) stated that “SSL and NZ Guardian [who acted prior to DBL] have been very accommodating and patient to Mr Schutt in spite of his continuous defaults”.

[14]   Those facts give rise to an arguable defence in equitable estoppel, or alternatively contractual waiver.

Conclusion

[15]     The plaintiffs, DBL, have not satisfied the Court that the defendant has not defence to the cause of action in the statement of claim.  Accordingly I decline to grant summary judgment on the statement of claim as it is presently pleaded.

[16]     Costs are reserved in accordance with the Court of Appeal’s decision in

NZI Bank Ltd v Philpott.7

7      NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).

Associate Judge Sargisson