Drake v Rankin
[2013] NZHC 3001
•13 November 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2013-485-420 [2013] NZHC 3001
BETWEEN CATHERINE MARIE DRAKE and INDEPENDENT TRUST COMPANY (2007) LIMITED
Plaintiffs
ANDMATHEW CHARLES RANKIN Defendant
Hearing: 13 November 2013
Counsel: D G Dewar for Plaintiffs
No appearance for Defendant
Judgment: 13 November 2013
ORAL JUDGMENT OF THE HON JUSTICE KÓS
[1] This is a claim in debt brought by the plaintiffs, Catherine Marie Drake and
Independent Trust Company (2007) Limited, as trustees of the Millie Trust. [2] The defendant Mathew Rankin is the former son-in-law of Mrs Drake.
[3] Until recently, Mr Rankin was in receipt of legal aid. On 6 November 2013 that was withdrawn. His counsel then withdrew also. Mr Rankin discontinued a related proceeding (that was in effect a counterclaim to the present claim).
[4] Mr Dewar confirmed with Mr Rankin’s previous counsel that Mr Rankin was aware of today’s fixture. But today Mr Rankin did not attend.
[5] Mrs Drake this morning gave sworn evidence confirming the contents of affidavit evidence sworn in support of an unsuccessful application for summary
judgment, and in opposition to an unsuccessful application by Mr Rankin to strike
DRAKE and INDEPENDENT TRUST COMPANY (2007) LIMITED v RANKIN [2013] NZHC 3001 [13 November 2013]
out. The procedure that had been agreed for the conduct of this hearing was that the affidavits would be taken as read, and the deponents be available for cross- examination. As Mr Rankin has not attended Court, no evidence was led for him. I therefore put from my mind the contents of his affidavits. However the result would not have been different had I taken them into account.
Background
[6] Mrs Drake, her daughter and Mr Rankin were involved in a hair dressing salon business, Getfunkd Manners Limited (GFML). It operated a hair salon business in the James Smith’s building in Manners Street, Wellington, until December 2012.
[7] It is not disputed that the plaintiffs advanced money to GFML between February and October 2008. The total sum advanced was some $520,082.18. The money was used by GFML to purchase business assets. The evidence is that the business traded successfully until 2012 when it got into difficulties. In December
2012 the business closed.
[8] The evidence before me is that Mr Rankin appears to have taken with him most of the assets of GFML. He started a new venture, Getfunkd Dixon Limited, operating a rival salon under the same branding at a nearby location. The sole shareholder in Getfunkd Dixon Limited is Mr Rankin’s father, Charles Christopher Rankin. There is evidence before me that Mr Mathew Rankin runs that business. It may be that there is a cause of action by either the Millie Trust or GFML against either of the Messrs Rankin in relation to the circumstance in which the rival business came into operation. But that issue is not before me today.
Claim in debt
[9] As I said at the outset of this judgment this is a claim in debt. It is admitted that on 23 October 2008, the parties and GFML entered into a deed of acknowledgment of debt in respect of the advance of $520,082.18. The principal debtor is GFML. The defendant Mr Rankin is guarantor and a principal party in respect of the debt. He is jointly and severally liable with GFML in respect of all the
borrower’s obligations. On the same day the defendant and GFML also entered into a general security agreement.
[10] It is admitted by Mr Rankin that under the terms of the deed of acknowledgment of debt, interest is payable on 31 March each year at a rate of 8 per cent per annum – provided notice is given in writing on or prior to 1 March in the applicable year. That is, notice must be given by the eleventh month of the year for interest to be paid in respect of all 12 months. In this case it is clear that notice was given by Mr Dewar on behalf of the plaintiffs on 26 November 2012. Therefore, interest is payable for the year 1 April 2012 to 31 March 2013.
[11] It is also admitted by Mr Rankin that the agreement provides that should interest not be paid as sought, then the plaintiffs are entitled to penalty interest at the rate of 12 per cent per annum.
[12] All this would therefore be a straightforward basis for a judgment on the debt and guarantee. But in his pleadings Mr Rankin has raised three defences.
Defences pleaded
[13] Mr Rankin’s first defence was that the deed of acknowledgment of debt provided that the debt was only repayable in 2028. However, and as Mr Dewar submitted to me, that defence has been exploded by the judgment of Collins J delivered on 29 July 2013. In that judgment, on Mr Rankin’s strike-out application, Collins J found that GFML (and therefore Mr Rankin) could be required to pay all outstanding debts prior to 2028, in the event of default in the payment of interest. Collins J reached that conclusion on the basis of cls 2, 20 and 21 of the memorandum of general terms and conditions annexed to the general security agreement. I have read what Collins J has said about that. Even if it were open to me to reach a different view, I would not have done so. It is clearly correct that the debt in this case is capable of being called up in the event of any default. In this case there was plainly default in relation to payment of interest. The consequence of that default is that not only is interest payable, but also the entire principal sum.
[14] Mr Rankin’s second defence advanced was that very substantial sums (which he was incapable of quantifying, but which he suggested were in the order of between $100,000 and $200,000) had been paid in cash to the plaintiffs from the business. That is a serious allegation, but I am satisfied there is no basis whatever for it to have been made. Mrs Drake has produced the banking records. They are consistent with the financial records of the company. They suggest there was no payment of cash above and beyond the revenue of the company shown in the books of the business. As I noted at the outset of this judgment, Mr Rankin did not trouble to attend Court today and give evidence in support of his allegation. I regard it as disgraceful and unsustainable.
[15] Mr Rankin’s third suggested defence was there had been a failure to mitigate loss, in that assets of GFML had been retained by the plaintiffs. It is doubtful that this is a relevant defence to debt.1 But in any case Mrs Drake gave evidence before me today and it is clear that any retention of assets and realisation (perhaps $200 for the sale of six chairs) is utterly de minimis. In the absence of any evidence from Mr Rankin, I put this point to one side.
Conclusion
[16] The accounts of GFML show that a greater sum is due by GFML to the plaintiffs than the amount sought today. Mr Rankin, has executed tax returns for the company based on those financial accounts. He cannot now dispute the accounts. What is sought today is probably less than the full amount due by both Mr Rankin and GFML to the plaintiffs. Nonetheless the plaintiffs have chosen to bring their claim on the simple basis presented in the deed of acknowledgment of debt, with interest due as per the 26 November 2012 demand.
[17] It is clear in this case that there is a debt, that it is due, that there is a valid guarantee, and that the amount due is at least the sum for which judgment is sought.
1 Reichman v Beveridge [2006] EWCA Civ 1659.
Result
[18] There will be judgment for the plaintiffs against the defendant in the sum of
$520,082.18, together with interest for the period 1 April 2012 to 31 March 2013 of
$62,409.84. That is judgment therefore for a total amount of $582,492.02.
[19] Costs are awarded on a category 2 band B basis in respect of all steps in this proceeding. I regard that as a merciful stance by the plaintiffs. Costs on an increased basis might have been justifiable. Disbursements will be as agreed, or as fixed by the Registrar.
Stephen Kós J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiffs
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