Drake v Rankin
[2013] NZHC 1889
•29 July 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-000420 [2013] NZHC 1889
BETWEEN CATHERINE MARIE DRAKE and INDEPENDENT TRUST COMPANY (2007) LIMITED
Plaintiffs
AND
MATHEW CHARLES RANKIN Defendant
Hearing: 29 July 2013 Counsel:
D G Dewar for Plaintiffs
M M van den Bergh for DefendantJudgment:
29 July 2013
JUDGMENT OF COLLINS J
Introduction
[1] This judgment explains why I have decided to dismiss Mr Rankin’s
application to strike out part of the statement of claim brought against him.
Context
[2] Ms Drake and Independent Trust Company (2007) Ltd are trustees of a family trust called the Millie Trust. The Millie Trust was created on 30 January
2008.
[3] Mr Rankin was a director and a shareholder of a company called Getfunkd Manners Ltd (Getfunkd) which was a hairdressing business in Manners Street, Wellington. The Millie Trust was also a small shareholder of Getfunkd and
Ms Drake was formerly a director of that company.
DRAKE v RANKIN [2013] NZHC 1889 [29 July 2013]
Agreement and a memorandum of terms and conditions of the General Security
Agreement (memorandum).
[5] Mr Rankin guaranteed the advance. However, he says that the terms of the loan provided for Getfunkd to only repay any debt which was outstanding on
7 October 2028.
[6] Getfunkd has ceased trading. The Millie Trust has demanded Mr Rankin now pay all sums it says are outstanding.
[7] The key matters in dispute between the parties are:
(1) Can Mr Rankin be required to repay the outstanding debt before
7 October 2028? If so,
(2) What, if anything, is the amount of the outstanding debt?
Procedural history
[8] The Millie Trust sought summary judgment against Mr Rankin. That application was heard by Associate Judge Christiansen on 25 June 2013. The Associate Judge had before him three affidavits from Ms Drake and two from Mr Rankin. Those affidavits set out many factual disputes between the parties. Summary judgment was declined because the factual issues could not be appropriately resolved in a summary judgment application. Those factual disputes included:
(1) the amount that Mr Rankin had repaid the Millie Trust;
(2) the amount that the Millie Trust had advanced to Getfunkd; and
who is also Ms Drake’s daughter.
Mr Rankin did not at that time submit that the Millie Trust was unable to demand payment of all outstanding interest and principal.
[9] The substantive proceeding is set down for hearing on 13 November 2013. In the meantime Mr Rankin has applied to strike out that part of the statement of claim in which it is said that the “advances to [Getfunkd] were on the basis that they were repayable on demand, and would be guaranteed by [Mr Rankin]”.
Principles governing strike-out
[10] The principles governing a strike-out application are well settled. In the context of this case I may strike out part of the statement of claim if I am satisfied it discloses no reasonably arguable cause of action.1 The strike-out jurisdiction is to be exercised sparingly and only if I am satisfied that the cause of action in question is “clearly untenable”.2
Can Mr Rankin be required to repay all outstanding debts before 7 October
2008?
[11] Mr Rankin says that under the terms of the deed of debt he agreed to repay
the debt “then outstanding” on the “20th anniversary of 7 October 2008” being
7 October 2028. He says that while the deed of debt provides for the repayment of interest on an annual basis, the deed of debt does not enable the Millie Trust to demand repayment of the principal outstanding in the event Getfunkd or he defaults in repaying interest or principal.
[12] Clause 2 of the memorandum contains a standard comprehensive definition
of “secured moneys”. The relevant part of that definition says that “secured moneys” means:
1 High Court Rules, r 15(1)(a).
2 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
a party granting the security or an accommodated person to the
security holder ... (emphasis added)
[13] Clause 20 of the memorandum governs security holders’ rights and powers
on default of payment. Clause 20(a)(i) provides:
s
[15] Mr Rankin says cl 21 of the memorandum does not allow the Millie Trust to demand payment of all outstanding principal if Getfunkd or Mr Rankin defaults in making repayments.
20. RIGHTS AND POWERS OF SECURITY HOLDER ON DEFAULT (a)
Rights and powers generally: If default occurs, the security holder may at any time or times thereafter, in addition to any rights, remedies or powers otherwise conferred upon the security holder by law, exercise all or any of the following rights and powers separately or any two (2) or more of them concurrently:
(i) call up the balance of the secured moneys in accordance with clause 21; or
...
[14]
Clau
e 21 of the memorandum provides:
21.
ACCELERATING PAYMENT OF SECURED MONEYS ON DEFAULT
If default occurs, the secured moneys will become due and payable by the party granting the security in accordance with the provisions in any agreement relating to their payment or, to the extent any notice is required by law to be given before the secured moneys become payable, immediately on expiry of the relevant notice period, without the need for any further notice or demand together with interest calculated at the prescribed interest rate for a period of one month in addition to interest to the date of repayment of the secured moneys.
[16] I disagree for two fundamental reasons:
(1) Secured moneys include moneys that are due “now and in the future”.
Accordingly, the text of cls 20 and 21 of the memorandum permits the lender to “call up the balance” of the principal if the borrower defaults.
(2)It would be commercially unrealistic for a lender to be unable to demand repayment of all outstanding principal in the event of a default in payment. No lender would ever agree to such a term. A purpose of cls 20 and 21 of the memorandum is to enable the lender to “call up” the balance of the principal outstanding in the event of a default in repaying principal and interest.
Conclusion
[17] The application for a strike-out must be dismissed. As I understand the pleadings, the real issue in this case concerns quantum. That is an issue that will only be able to be resolved following a hearing in which the factual disputes can be properly evaluated.
Costs
[18] Mr Dewar has sought costs. Ms van den Bergh advises that Mr Rankin is in receipt of legal aid. In these circumstances costs are reserved and will be determined
when the substantive proceeding is resolved.
D B Collins J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiff
Upper Hutt Law, Upper Hutt for Defendant
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