Dominion Finance Group Limited (in rec and in liq) v Tauber HC Auckland CIV 2009-404-6248
[2010] NZHC 149
•26 February 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2009-404-6248
AND BETWEEN DOMINION FINANCE GROUP LIMITED (IN RECEIVERSHIP & IN LIQUIDATION)
Plaintiff
ANDDAVID ANDREW TAUBER Defendant
Hearing: 5 February 2010
Appearances: AW Johnson for Plaintiff
D Grove for Defendant
Judgment: 26 February 2010 at 5:00 pm
JUDGMENT OF ASHER J
This judgment was delivered by me on 26 February 2010 at 5:00 pm
pursuant to Rule 11.5 of the High Court Rules
………………………………………..
Registrar/Deputy Registrar
………………………………………..
Date
Solicitors:
AW Johnson, Martelli McKegg Wells & Cormack, PO Box 5745, Wellesley Street, Auckland 1141
V Carmine, Carmine Vincent, PO Box 2603, Epsom, Auckland 1050Copy:
D Grove, Barrister, PO Box 130, Shortland Street, Auckland
DOMINION FINANCE GROUP LIMITED (IN RECEIVERSHIP & IN LIQUIDATION) V DAVID ANDREW
TAUBER HC AK CIV-2009-404-6248 26 February 2010
Preliminary
[1] The plaintiff seeks judgment against the defendant as guarantor of a loan agreement that is now in default. There is no issue as to the validity of the loan agreement or the guarantee. However, the summary judgment application is opposed by the defendant on the basis that there has been an informal compromise between the plaintiff and the defendant, and in terms of that compromise the plaintiff cannot proceed to claim the amount owed at this stage.
Basic facts
[2] The plaintiff, Dominion Finance Group Limited (In Receivership & In Liquidation) (“Dominion Finance”), lent Maximum Finance Limited (“Maximum Finance”) $9,008,000 on 30 May 2007. The defendant, Mr Tauber, signed a deed of guarantee and indemnity in respect of the loan, limited to $5,000,000. By 31 July 2009 Maximum Finance was in default and the total amount due and payable was $12,085,419.70. Accordingly, on its face, Mr Tauber is liable for the $5,000,000 as guarantor. Demand was served on Mr Tauber on 4 August 2009, and following that these summary judgment proceedings were filed.
[3] Mr Tauber opposes the application for summary judgment on the basis that the plaintiff’s claim against him was compromised on 31 August 2009 “pursuant to
an informal compromise with creditors”. The notice of opposition does not set out the defence with any particularity. However, the claim appears to be based on there having been a variation of the guarantee contract, or, alternatively, an estoppel.
[4] Mr Tauber sets out the basis of his defence in a short affidavit. He annexes a copy of a deed of compromise prepared by him and circulated to his creditors. The proposed compromise was to commence when passed by the requisite majority of creditors. It involved a moratorium of four years, and for payments amounting to a total of $1,500,000 through that period. The unanimous acceptance of the compromise of all creditors was required.
[5] Mr Tauber deposes that there was unanimous acceptance of the proposal, although the formal compromise was never signed or approved by the court. He says that on this basis he borrowed $255,318 and paid sums to various major creditors. At paragraph 9 of his affidavit he stated:
The plaintiff agreed to defer its entitlement to the staggered payment programme, as I said I would continue to invest in the Jolly Farmer which was the only security the plaintiff retained of any value. There was no equity left in this business …
[6] Mr Tauber asserts that on a basis of the compromise he borrowed yet a second tranche of money, being $223,068 and made various payments in the Jolly Farmer, a Hotel. He asserts that he was actively encouraged by the plaintiff to make this investment, and did so on the basis of the compromise. He annexed a letter from Dominion Finance dated 18 June 2007 confirming that it was “in principle” agreeable to entering into the scheme of arrangement, and seeking the full report. It appears that in due course a copy of the compromise was sent to Dominion Finance. There is also annexed a copy of an email from Mr Tauber to an executive of Dominion Finance, Matthew Adams. He asks for a letter from Dominion Finance confirming that it would vote in favour of the compromise scheduled for 30 November 2007, subject to Board approval.
[7] On 31 August 2007 Mr Adams responded with the following letter:
I acknowledge Dominion Finance Group Ltd has received the proposed compromise document from Mr Tauber.
After careful consideration and debate Dominion will support proposal and will vote in favour of the compromise scheduled for the 30th November 2007. We have urged Mr Tauber to actively canvas all affected parties to also support proposal as of course 0.20c in the dollar is preferable to the 0.13c.
Final approval is for the Board.
Please contact me direct if you have any questions, otherwise please let me know if the outcome of the proposed compromise.
[8] Dominion Finance has filed two affidavits in reply. One is from Mr Adams.
He asserts that Dominion Finance only accepted the proposal in principle, subject to
Board approval, and “on the basis that there would not be any weakening of
Dominion Finance’s position in respect of Mr Tauber’s obligations”. He also asserted that Dominion Finance would only provide conditional approval if another entity, such as a family trust, provided a guarantee. Mr Adams left Dominion Finance in December 2007 but was not aware whether the Board ever gave its approval. He annexes other emails that indicate some qualified support for a compromise.
[9] The plaintiff also filed an affidavit from a Mr Yelberton, who appears to be a consultant, not employed by Dominion Finance in 2007 but now assisting the liquidators. He asserted in his affidavit that in the telephone conversation of 2 April 2009 he was assured that the compromise was “never passed as he had informally settled with his other creditors on a case by case basis. Mr Tauber did not settle with Dominion Finance.”
Approach to summary judgment
Summary judgment principles
[10] The principles to be applied to an application for summary judgment are well settled and were not subject to any competing submissions. Rule 12.2 of the High Court Rules sets out when an application may succeed:
12.2Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.
It was said in Pemberton v Chappell:[1]
[1] Pemberton v Chappell [1987] 1 NZLR 1 (CA) at para [3].
In this context the words “no defence” have reference to the absence of any real question to be tried. That notion has been expressed in a variety of
ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.
[11] The legal principles relating to the grant of summary judgment were summarised in the recent Court of Appeal decision of Krukziener v Hanover Finance Ltd (2008). [2]They are as follows:
[2] Krukziener v Hanover Finance Ltd (2008) 19 PRNZ 162 at para [26].
a) The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell.[3] The Court must be left without any real doubt or uncertainty.
[3] At para [3].
b)The onus is on the plaintiff, but where the plaintiff’s evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart.[4]
[4] MacLean v Stewart (1997) 11 PRNZ 66 (CA).
c) The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents
or other statements by the same deponent, or is inherently improbable:
Eng Mee Yong v Letchumanan.[5]
d)In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel. [6]
[5] Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC).
[6] Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[12] There must be some evidential basis provided for a defence: Australian
Guarantee Corporation (NZ) Ltd v McBeth. [7] The court is not required to accept
[7] Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54.
without question sweeping and unsubstantiated statements made in affidavits. As
McGeghan J stated in United Homes (1998) Ltd v Workman: [8]
[8] United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 at 452.
The Court is not required in cases of this character meekly to accept without question whatever unvarnished statements may happen to be made on affidavit. The Court is entitled to act in a more robust and commonsense manner.
It was also stated by McGechan J in Roberts Family Investment Ltd v Total Fitness
Centre (Wellington) Ltd:[9]
[9] Roberts Family Investment Ltd v Total Fitness Centre (Wellington) Ltd [1989] 1 NZLR 15 at 18.
It is recognised that vague general statements or bare assertions without substantiating details by the defendants are unlikely in themselves to carry a court to the point of doubt or uncertainty.
Does the defendant have a defence?
[13] Mr Tauber’s affidavit involves general statements and bare assertions with limited supporting information. His bald statement that he entered into a compromise with creditors is unadorned with references to the time or places where the agreement was entered into, or the persons with whom he dealt. Similarly, his assertion that Dominion Finance agreed to defer its entitlement to the staggered payment is no more than that. There is no detail of this agreement at all. Statements pitched at this level of generality can invoke little confidence in the court that there really is a defence. The obvious omission to provide detail can be seen as indicating that the detail does not exist.
[14] However, there are some countervailing factors. The plaintiff’s affidavits in reply are almost as vague and unsatisfying as that of Mr Tauber. Mr Yelberton’s assertion of a telephone conversation about the compromise is not supported by any note or details as to the call or precise details as to what was said. Mr Adams’ affidavit asserting that Dominion Finance only accepted the proposal in principle is also lacking any detail as to the contents of actual discussions between Dominion Finance executors and Mr Tauber. It is not clear whether his view that there should be provision for further security was ever communicated to Mr Tauber. His
assertion that he is not aware that the Board ever gave approval in the absence of any
Minutes, given that he left in December 2007, again is of no assistance.
[15] There is, however, some support for the proposition that there was an agreement by Dominion Finance to at least defer the pursuit of Mr Tauber’s debt for
a period of time, to give him an opportunity to get his business affairs in order and start making some payments. The emails already referred to show that Dominion Finance was prepared to support a creditors’ compromise. Another email from Mr Adams dated 17 June 2007, which was sent to the professionals advisers, observes that Mr Tauber’s compromise proposal was a “little cheeky” and comes from an “angle where he was more or less a silent partner”. It was observed that it was in Dominion Finance’s interest to support the proposal and give Mr Tauber a way out personally to “concentrate on the payment [of] Dominion’s debt without risk of being tipped over personally”. In general, the emails indicate a relatively benign and co-operative attitude of Dominion Finance to Mr Tauber, consistent with it acquiescing to some compromise. Dominion Finance seems to approach the proposal from the point of view that if it does not co-operate with Mr Tauber, it may not get anything.
[16] In another in-house memo Mr Adams observes that agreement to any compromise will be on the basis of other satisfactory security being offered. However, this appears to be an observation and there is no evidence that this requirement was actually put to Mr Tauber.
[17] Mr Tauber’s claim that such an arrangement was reached is also supported by the fact that following the exchanges in 2007 about the creditors’ compromise, Dominion Finance did nothing to pursue the debt until August 2009, two years further on. Clearly Dominion Finance proceeded to get into financial difficulties and ultimately went into receivership and liquidation, and this may be an explanation for the delay. However, it is equally consistent with Dominion Finance having agreed not to pursue Mr Tauber for a period of time to enable him to invest further in his businesses and develop them. In the end the documents and sequence of events are not inconsistent with a situation where Dominion Finance may have agreed not to
take any steps on the guarantee for a period of time to enable Mr Tauber to invest further in his business and improve his financial position.
[18] Mr Grove for Mr Tauber perhaps wisely made no attempt to particularise the legal basis of Mr Tauber’s defence. At my request he articulated the contractual arrangement as follows:
The plaintiff’s claim for $5 million would be settled by way of a staggered dividend totalling 20 cents in the dollar, paid by a third party, those payments to be deferred pending Mr Tauber’s continued investment in the Jolly Farmer until the sale of the Jolly Farmer property.
[19] A number of obvious questions arise. Why was this not articulated by Mr Tauber in his affidavit? How much was Mr Tauber expected to invest in the Jolly Farmer? When was it expected that the Jolly Farmer property and/or business would be sold? Mr Tauber now appears to accept that any moratorium is over, as in his affidavit he offers to resume making some payments towards the debt.
[20] Clearly there was no formal compromise ever entered into. As counsel for the plaintiff Mr Johnson observes, there is no basis in knowing whether all or any of the creditors in fact approved the compromise. There is also force in his submission that the correspondence and emails indicate that Dominion Finance would support a formal scheme of arrangement, and not some informal scheme or proposal. It is also true that there is no actual evidence of Mr Tauber having made the payments he asserts he did make on the basis of the compromise.
[21] However, it remains possible that Mr Tauber did reach an agreement with
Dominion Finance executives that they would not proceed against him on the debt
on the basis that he paid money into the Jolly Farmer, which he proceeded to do. There is sufficient material before the court to satisfy me that it is possible that Mr Tauber could establish at least an estoppel against Dominion Finance, whereby it agreed to take no steps for a period of time. The representation upon which the estoppel would be based was that, providing Mr Tauber took steps to make payments to invest in the Jolly Farmer business, the plaintiff would defer its entitlement under the guarantee until its sale.
[22] It may well be that the Jolly Farmer property and business has been sold or should have been sold, and that any representation or contract variation of the type relied on by Mr Tauber has ceased to have any effect. However, this issue has not been addressed in the material before me. Nor has the issue of whether a reasonable period of time to sell the Jolly Farmer has passed. These matters cannot be determined in this summary judgment application.
[23] The defence put forward is full of gaps and unanswered questions. However, the plaintiff’s response has also been very general, and has not convincingly answered the matters raised. In all the circumstances, by a fairly bare margin, I am satisfied that there is an arguable defence to the claim, at least as presently pleaded and argued. Being satisfied that there is a fairly arguable defence, this is not an appropriate case for summary judgment.
Result
[24] The application for summary judgment is accordingly declined. Costs are reserved.
………………………… Asher J
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