Easy Energy Limited v Jump NZ Limited HC Wellington CIV-2010-485-2294

[2011] NZHC 757

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-2294

BETWEEN  EASY ENERGY LIMITED Plaintiff

ANDJUMP NZ LIMITED Defendant

Hearing:          17 May 2011

(Heard at Wellington)

Counsel:          K. Johnston - Counsel for Plaintiff

K.P. Sullivan - Counsel for Defendant

Judgment:      1 July 2011 at 3:00 PM

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 28 June 2011 at 3.00 pm under r 11.5 of the High Court Rules.

Solicitors:           Crengle, Shreves & Ratner, Solicitors, PO Box 10236, Wellington

Wilson & Co, Solicitors, PO Box 208, Wellington

EASY ENERGY LIMITED V JUMP NZ LIMITED HC WN CIV-2010-485-2294 1 July 2011

Introduction

[1]       The plaintiff company, Easy Energy Limited (EEL) applies for summary judgment for the balance of a debt said to be owed to it by the defendant company, Jump NZ Limited (Jump).

[2]       The application is opposed by Jump.

Background

[3]       EEL carries on business as a provider of water and energy metering services to commercial premises and apartments.   Its director is Mr Allan Davidson (Mr Davidson). Jump carries on business  involving commercial relocations, fit-outs and storage.  Its director is Mr Murray Allerby (Mr Allerby).  The two are related companies.  Half of EEL’s shares are beneficially owned by the Sea Dog and Barnacle Trust.  All of the shares in Jump are owned by the Allerby Family Trust.  Mr Allerby is a discretionary beneficiary of the Sea Dog and Barnacle Trust and is a beneficiary of the Allerby Family Trust (although what class of beneficiary is not specified).

[4]       The two companies EEL and Jump are also related to a further two companies, Envirogroup Limited (Envirogroup) and Environmental Contracts Limited (Environmental Contracts).   Envirogroup carries on business installing and maintaining air conditioning units and plumbing systems.  Mr Davidson is its sole director and the Sea Dog and Barnacle Trust owns one third of the shares in the company.  Environmental Contracts is a property holding company which owns property in Kilbirnie, Wellington from which Jump, EEL and Envirogroup  traded  until  2010.    Again,  it  is  in  some  way  a  related  company.    As  I understand it, Jump completed wiring as part of a fit out for the Kilbirnie building owned by Envirogroup from which the companies operated.

[5]       Mr Allerby assisted Mr Davidson in establishing EEL and Envirogroup and has provided management services to EEL and Envirogroup.   Mr Allerby has received salary from EEL, Envirogroup and Jump at varying times.    Instances of intermingling of assets between the three companies has occurred from time to time.  Before me, EEL accepted that it owed Jump $1,598.69 and that this amount should be off set against any judgment in its favour.

[6]       In early 2008, EEL and Jump entered into a finance agreement (the Agreement). EEL agreed that it would make loan facilities available to Jump on a short term basis, although no formal documentation was put in place.  Pursuant to that Agreement, between

17 April 2008 and 11 August 2010, EEL made a series of loans to Jump totalling $323,500. A document before the Court records one of these loans on 20 August 2010 (no explanation has been given of the fact, however, that this 20 August 2010 memorandum records a loan made on 17 April 2008).  That memorandum evidences the standard form of documentation that these loans took in this way:

INTEREST EARNING INTER-COMPANY SHORT TERM LOAN (12% interest p/a)

The amount of $35 000.00 were [sic] deposited into Jump NZ Ltd account [sic] on

17 April 2008 as an “Interest earning Inter-company Short Term Loan”.

A daily interest rate calculated on an annual rate of 12% will be charged until funds are paid back in full to Easy Energy.

[7]       To date, only $89,500 of the total $323,500.00 loans has been repaid.  I also note here that interest has not been claimed in the present case.

[8]       Due  to  a  breakdown  in  what  was  previously  a  good  relationship  between  Mr Davidson and Mr Alleby, as at October 2010 their respective interests in the companies were to be separated.  Accordingly, Mr Alleby ceased to act as an employee of Envirogroup and EEL.

[9]       On 2 November 2010, EEL, through its solicitors, sent a letter of demand to Jump demanding repayment of the outstanding debt under the Agreement which was then said to be $234,000.   Mr Alleby’s response was that loans to Jump could not be called up in isolation and were not repayable on demand, in light of a range of other loans that had been provided and remained outstanding between the interconnected companies.

Summary Judgment Principles

[10]      The present summary judgment application is brought pursuant to r 12.2(1) of the

High Court Rules provides:

12.2 Judgment 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.

[11]      The principles of summary judgment have been summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]:

The principles are well settled. 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 [1987] 1 NZLR 1; (1986) 1 PRNZ

183 (CA), at p 3; p 185. The Court must be left without any real doubt or

uncertainty. The onus is on the plaintiff, but where its 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 (1997) 11 PRNZ 66 (CA). 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 [1980] AC 331; [1979] 3

WLR 373 (PC), at p 341; p 381. 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 (1987) 1 PRNZ 84 (CA).

Counsels’ Submissions and My Decision

[12]      That a valid loan agreement was entered into and the loan has not been repaid in full does  not  appear  to  be  disputed  by  Jump.    Rather,  Jump’s  defence  here  is  that  either repayment of the loan was not able to be demanded or, alternatively, that Jump can prove a valid equitable set-off to EEL’s claim.

[13]      Mr Davidson for EEL claims here that it was agreed that the loans in question were repayable by Jump upon demand.  That is evidenced he says by the fact that emails which Mr Allerby’s employee sent to Mr Davidson, acknowledge the advances as “temporary loans” and the memorandum used to record the loans recorded them as “short term loans”. In response, Mr Allerby claims that there was no requirement to repay the total sums of those loan amounts.  He contends that is evident from the level of general borrowing from all the investors here.   Before me, Mr Johnston, for EEL, submitted that to interpret those circumstances  in  any  way  other  than  to  find  the  amount  due  of  $234,000.00  as  an outstanding loan would not only make nonsense of the parties’ mutual description of the loans as such, but would not make commercial sense.  I agree.

[14]     On the state of the evidence before the Court that the loans first, were expressed as such (“loans”) and secondly, that they were expressed as being either “temporary” or “short term”, I am satisfied that the loans were repayable, if not immediately on demand, then certainly within a reasonable time of demand being made.  Demand for repayment has been made here, and certainly a reasonable time has elapsed since the making of that demand but it has gone unremedied.

[15]      As his principal and alternative defence here, Mr Sullivan, for Jump, argues that

Jump and the related Alleby Family Trust have valid unliquidated claims against both EEL

and Envirogroup which amount to an equitable set-off of EEL’s claim against Jump.   In

summary, the claims are:

a.     Jump  claims  $49,073  from  Envirogroup  for  alleged  non-payments  under  a supply and lease agreement and other invoices due;

b.    Jump claims $20,000 from Envirogroup and EEL for wiring and telephone equipment;

c.     Jump claims $15,300 from EEL for a printer said to be purchased by Jump but used by EEL;

d.    Jump claims $2,378.60 from EEL for other unpaid invoices;

e.     The Allerby Family Trust (the sole shareholder of Jump) claims $35,000 from

EEL for repayment of an alleged loan;

f.     The Allerby Family Trust claims $75,000 from Envirogroup for repayment of an alleged loan; and

g.     Mr Allerby asserts various claims against Mr Davidson for mismanagement of companies in which Mr Allerby was a shareholder.

[16]     In raising the prospect of an equitable set-off, Mr Sullivan relies on the following statement of the Court of Appeal in Grant v NZMC [1989] 1 NZLR 8 at 12-13:

The principle is, we think, clear.  The defendant may set-off a cross-claim which so affects the plaintiff’s claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account.  The link must be such that the two are interdependent: judgment on the one cannot fairly be given without regard to the other; the defendant’s claim calls into question or impeaches the plaintiff’s demand.   It is neither necessary, nor decisive, that claim and cross- claim arise out of the same contract.

[17]     In  Moorhouse  Kitchens  and  Appliances  Limited  v  Nelson  Kitchen  Appliances Limited HC Christchurch CIV-2010-409-2175, 7 December 2010 Wylie J commented on this aspect at [32]:

An equitable right is not limited to liquidated cross-claims [unlike legal set-off], but extends to unliquidated claims for damages.

[18]     In  Moorhouse  Kitchens  the  parties  had  entered  into  an  agreement  whereby Moorhouse Kitchens would itself order products through wholesalers for Nelson Kitchen Appliances in order for Nelson Kitchen Appliances to enjoy the beneficial position (and rebates) that Moorhouse Kitchens enjoyed with its suppliers.   Nelson Kitchen Appliances failed to repay Moorhouse for products ordered on its behalf.  Moorhouse Kitchens had an agreement with its wholesalers that it would receive rebates depending on the quantity of product purchased.  Moorhouse Kitchens argued that it was agreed that it would retain the rebates earned for Nelson Kitchen Appliances’ purchases.   Nelson Kitchen Appliances’

response was that no such agreement was ever made.  On Moorhouse Kitchens’ application for summary judgment Nelson Kitchen Appliances argued that its claimed set-off in relation to the unpaid rebates was a defence. Wylie J held at [32]:

Here Nelson’s claim is clearly so connected with Moorhouse’s claim that it would impeach Moorhouse’s title to be paid and raise an equity in Nelson, making it unfair that it should pay Moorhouse without deduction.

[19]     In  that  case,  however,  summary  judgment  was  declined  as  there  were  other significant factual disputes between the parties.

[20]      While that position as to the existence of an equitable set-off is settled law, generally there must be a claim to be set off against a claim between the same parties: Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309 (CA) at [8]. As Tipping J, for the Court said in Hamilton Ice Arena at [8]-[9]:

The need for identity of parties is also consistent with the proposition that the cross- claim is regarded in equity [as] fully or pro tanto extinguishing the plaintiff's right to judgment on the claim. The concept of extinguishment is difficult if the cross-claim is made by a different party.

…While we would not wish to rule out the possibility that in some unusual circumstance it might be appropriate to allow equitable set-off where there is no identity of parties, any such circumstance (other than one justifying the lifting of the corporate veil) would have to be consistent with the extinguishment rationale.  In this case,  there being no  basis for  lifting the  corporate veil and  equating the  Speirs brothers with Hamilton Ice, we are of the view that the lack of identity of parties is in the circumstances fatal to Hamilton Ice's claim to set off the money owing by Perry to the Speirs brothers against the money which it owed Perry for rent.

[21]     In  Hamilton  Ice  Arena,  due  to  the  appellant’s  failure  to  pay  rent  owing,  the respondent entered the appellant’s premises and forfeited the lease.  The appellant contended that that entry was unlawful as the respondent owed money for wages to the appellant’s shareholders and directors for work previously done on an entirely different building for the respondent.  The Court was not satisfied that there was sufficient identity of the parties to enable the appellant to argue that the money owed to its shareholders and directors operated as a set-off with respect to the rent it owed to the respondent. At [41] Tipping J noted:

The  two  contracts here  –  the  lease  and  the  refurbishment contract  –  concerned different premises in different cities.  One involved rent, the other wages.  They really have no practical or conceptual linkage at all.   The fact that the money due to the Speirs brothers was intended by them to be used to discharge Hamilton Ice’s obligations under the lease is by no means sufficient for equitable set-off.  In almost all cases of money cross-claims one party can say to the other, if you had paid me I would have been able to pay you.  If that were a sufficient justification for set-off, the difference between set-off and counter claim would be blurred almost to the point of extinction.    An  issue  such  as  the  present  is  in  the  end  one  which  turns  on  a combination of analysis and impression.  The trial Judge came to the view that the

claims were not sufficiently linked.  We cannot say he was wrong; indeed we agree with his conclusion. This ground of appeal must therefore fail.

[22]      On all of this, Fogarty J in Le Fleming v Awataieri Holdings Limited HC Dunedin

CIV-2009-412-848, 19 March 2010 provided some further clarification at [20]-[21]:

The criteria of “link”, and “sufficient close connection” are standards.   Their application turns on a “combination of analysis and impression” per Tipping J in Hamilton Ice: [41]…

The ultimate issue is unconscionability.

[23]     In the present case, Mr O’Sullivan confirmed to the Court that Mr Alleby has now instructed counsel to file proceedings to recover all monies owed to the Alleby Family Trust and Jump from EEL and Envirogroup in order to offset the loans to be repaid by Jump (for those claims see [15] above).   Further, he said that Mr Alleby seeks to claim against Mr Davidson for damages with respect to the decrease in the value of EEL and Envirogroup and thus the value of his beneficial shareholding interest in the companies.

[24]     Mr Sullivan submitted that while the debts owed by Envirogroup and EEL to Jump and the Alleby Family Trust are between companies which are not technically a group, due to the direct connection between the shareholding in these companies, the way in which the companies have been run and the claims which Jump has against Envirogroup mean that Jump’s claims impeach EEL’s demand.

[25]     Mr Sullivan argued further that there are substantial factual disputes between Mr Alleby and Mr Davidson with respect to the level of interconnectivity between Jump and EEL and between Envirogroup and EEL.  Therefore, Mr Sullivan submitted that, relying on Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62]-[63] (which, although a case involving a  def endant’ s   application  for   summary judgment, has been accepted to apply equally to a plaintiff’s application in  Moorhouse Kitchens at [36]), as endorsed by the Privy Council in Jones v Attorney-General [2004] 1

NZLR 433 (PC) at [5]), this is a case where summary judgment would be inappropriate.

[26]      Mr Johnston responded to those arguments by contending that EEL and Jump are not members of a single group and to accept that there is mutuality in identity between EEL’s claim and Jump’s alleged claim ignores the separate legal personality of the companies.

[27]     I am satisfied in the present case on the evidence before me that Jump was never treated as being in the same group of companies as EEL and Envirogroup.  However, it is apparent that this is not necessarily the case for EEL and Envirogroup.  That appears from a

confidential 25 September 2001 Board Memorandum, signed by Messrs Davidson and Allerby   and   another,   Mr   Rob   Marshall,   to   the   effect   that   Envirogroup   Limited, Environmental Contracts Limited, Easy Energy Limted and another, “EML”, will operate under the operational name of “Envirogroup” and “all decision for this group & these Companies will be equally shared between” Messrs Alleby, Marshall and Davidson.  Indeed, Mr Davidson at paragraph 8 of his 31 March 2011 affidavit deposes:

While it is correct to say that the plaintiff, Envirogroup and Enviromental Contracts Ltd were and are treated for operating purposes as a “group” (although they are not, strictly speaking, a “group of companies” as defined in the Financial Reporting Act

1993), the defendant company is not, and has never been, treated as part of that group.

[28]      I accept Mr Johnston’s starting point that, as held by the Privy Council in Lee v Lee’s Air Farming Limited [1961] NZLR 325, a company is a legal entity, with its own individual legal existence. Here claims are, for the most part, alleged against different companies. Therefore no identity of parties arises. Further, I am satisfied that the facts of this case do not raise an evidential threshold to justify this Court in lifting the corporate veil in accordance with the test adopted by Tipping J in Bentley Poultry Farm Ltd v Canterbury Poultry Farmers Co-operative Ltd (No 2) (1989) NZCLC 96,269 at [64790]-[64791].  I turn now to consider, however, whether there are sufficiently unusual circumstances to allow equitable set-off even though it is acknowledged in this case that there is no identity of parties.

[29]      The comments of Tipping J in Hamilton Ice Arena noted above confirm that it is only in exceptional circumstances that a Court will find a set-off where there are claims against separate legal entities.  That is because a claim against a separate outside legal entity ought not to extinguish a company’s right to judgment on its claim.  As noted by Associate Judge Bell in Williams v Hill HC Auckland CIV-2010-404-505, 4 August 2010 at [79]:

Once  a  plaintiff  has  established  a  prima  facie  case  in  a  summary  judgment application, if a  defendant wishes to  claim that  there are  unusual circumstances making it appropriate to allow equitable set-off despite no identity of parties, then there is an initial onus on the defendant to show some plausible basis to claim unusual circumstances where equitable set-off might be arguable, despite the lack of identity.

[30]     As  I  see  it  here,  there  are  three  relevant  decisions  of  this  Court  where  the “exceptional circumstances” which Tipping J discussed in Hamilton Ice Arena have been considered.

[31]     In Georgiou v Morton HC Christchurch AP4/02, 26 March 2002, John Hansen J considered an application for leave to appeal against an entry of summary judgment against the appellants in the District Court.  The appellants purchased a property from TRR Limited

through their nominee company Athanati.  TRR’s shareholders and directors were Messrs Wilkins and Reinke.  The appellants entered into negotiations with the pair and agreed on a sale price of $2,865,000.00.  The appellants agreed to pay only $2,600,000.00 to TRR and paid the remaining purchase price directly to Messrs Wilkins and Reinke on a monthly basis. Messrs Wilkins and Reinke also entered into an arrangement with the appellants whereby they would lease the property.   Messrs Wilkins and Reinke entered into a sub-lease to a nominated company with the pair guaranteeing rent.   Messrs Wilkins and Reinke, after making the first payment, sought to find an alternative tenant and defaulted on the second payment.  The appellants sought to set-off the monthly payment due to Messrs Wilkins and Reinke, which payment was properly due to TRR, against the rent due.

[32]     Subsequently, the debt owed to TRR had been assigned to the respondents.   No further rental payments were made to Athanti.  In that case, John Hansen J considered that “it is impossible to say there is no practical or conceptual linkage between the agreement between” the appellants and Messrs Wilkins and Reinke.  Further, his Honour noted at [23]:

… regarding the statement “if you pay me I will pay you”.  The price was agreed on of [sic] $2.865 million, at least on the appellants’ evidence, on the basis that the rental of the restaurant would be $278,000 per year, a figure acknowledged as far more than the market rental.  That places it in a somewhat different context to the statement of Tipping J.

[33]     In those circumstances, John Hansen J was satisfied that the Judge was wrong to conclude that there was no arguable right of set-off.

[34]      In Martin v Hitex Plastering Limited HC Tauranga CIV-2003-470-72, 10 July 2003, Venning J considered an appeal from the entry of summary judgment in the District Court at Tauranga against the appellant.  The appellant purchased from Plastertech a franchise which involved selling the Hitex plastering system.   In so doing, she signed a credit application form which guaranteed to the respondent payment of all moneys due by her company.  The franchise did not perform as well as she was told it would by a representative of Plastertech and Hitex.  The appellant claimed misrepresentation against Hitex for that representative’s representations.  The respondent argued that any claim in relation to those representations was a claim against Plastertech and the respondent had merely supplied a product to the appellant’s  company  for  which  it  had  not  been  paid.    The  appellant’s  argument  was, however, that the representations caused the appellant to enter into both the franchise agreement with Plastertech and the credit application (and guarantee) with the respondent. Venning J allowed the appeal on either one of two bases.    The first of these was that the representations relied upon were made on behalf of both the respondent and Plastertech (at

[16]).  Secondly, and alternatively, he allowed the appeal on the basis that this case was a

Hamilton Ice “unusual case”.  At [16], his Honour went on to conclude:

It may well be that if the relationship between Hitex and Plastertech in this case is so inter-related as appears from the documentation referred to and the respective roles are so confused that the Court would at a substantive hearing be prepared to accept the representations were made on behalf of both parties.

[35]      In Le Fleming v Awataieri Holdings Limited HC Dunedin CIV-2009-412-848, 19

March 2010, Fogarty J also considered an appeal against an entry of summary judgment in the District Court against the appellant.  The appellants were sharemilkers on a farm owned by a subsidiary of Big Sky Dairy Limited.  From time to time the appellants took certain stock off the farm for grazing, and this was always to land owned by the respondent.  The respondent sued the appellants for unpaid grazing fees.  The appellants claimed that at all material times they were effectively required to use the respondent’s land for grazing out their stock because the respondent was a company controlled by a Mr Humphries who was, at all material times, in substantial control of Big Sky.   The appellants claimed also that there was a prior history of set-off between Big Sky and Awataieri.  Mr Humphries however disputed that he was the owner of the respondent or that he controlled Big Sky.  In that case, Fogarty J concluded at [23]:

I am not persuaded that a Court can decide reliably in a summary judgment process that the facts of Hamilton Ice are a close analogy with the facts here.   Here the unconscionability can be argued on two alternative bases:

1.      A prior history of agreed set-off or “squaring”, according to the Le Flemings,

(absent in Hamilton Ice);

2.      Alternatively,  building  upon  Mr  Humphries’  account,  of  past  unilateral conduct, by Mr Humphries, when his interest controlled Big Sky, of short- paying the Le Flemings when it suited Big Sky and Awataieri.   Such an argument would not be based upon mutuality of agreements, as in Hamilton Ice.

Either way, past advantage, mutual or unilateral, can make subsequent conduct unconscionable.

[36]     His Honour went on to distinguish Hamilton Ice from the case before him on the grounds that there was geographic proximity between the two agreements and a history of set-offs.

[37]      Returning to the present case, I will deal first with the transactions between Jump and Envirogroup.  The amounts claimed appear to be for various inter-company transactions which are invoiced but have not been paid, such as a basic supply and lease agreement. Therefore, far from these claims being loans, or moneys advanced by Jump to Envirogroup, they are moneys said to be owed for services rendered by Jump which have not been paid by

Envirogroup.  In those circumstances there is a possible argument that had Envirogroup paid these invoices to Jump, Jump would not necessarily have repaid the moneys it owed to EEL. Indeed, by Jump having invoiced Envirogroup suggests that Jump expected to be paid, whereas, at one point it argued that it never had any obligation to repay the money lent by EEL to Jump.     There is a possible argument open therefore that the monies owed by Envirogroup are of such a different nature that it cannot be said there is a close sufficient connection between the transactions.  But all this detailed financial intermingling here and the complex circumstances of these closely related business parties does not assist in a clear understanding of what truly happened.

[38]      Turning to the second group of transactions, those where Jump is owed funds by EEL, EEL accepts that Jump is entitled to set-off certain amounts which EEL owes to Jump. However, EEL disputes the quantum.   The amounts claimed by Jump refer to a printer acquired by Jump, a telephone system installed by Jump in the premises shared by the companies and a contract held by Jump with Telecom New Zealand on which contract are EEL and Envirogroup’s cell phones.   Jump therefore incurred the liability for EEL and Envirogroup’s telecommunications.   Mr Allerby further claims that there is $2,378.60 outstanding for unpaid invoices.

[39]      Mr Davidson deposes in his 31 March 2011 affidavit that Jump invoiced EEL for the use of the printer.  Invoices are presented in support.  I therefore disregard that claim.  Jump cannot, on the one hand, demand payment for a printer for which, on the other, it has made charges for its use in the past.

[40]      Further, with regard to Jump’s liability to Telecom New Zealand, all charges it seems were paid by EEL to Jump and Jump has since cancelled these services, incurring a break fee of $6,728.33.  While I note that Mr Sullivan did not categorise that amount as part of the various claims listed in favour of set-off, even if he did, I would not be minded to allow Jump to claim for it.  That contract was between Jump and Telecom New Zealand.  It was Jump’s decision to cancel the contract.  Indeed the effect of cancellation was that EEL and Envirogroup had to incur significant expenditure to get their telecommunications operational again.  As for the $20,000 telephone system, Mr Davidson says that it was EEL which purchased the system and paid for its installation, and presents invoices in support (he says that it cost $16,546.50).   Mr Allerby provides no such evidence in support of his contention.  I therefore disregard that claim.

[41]     With regard to the direct miscellaneous charges, of course there would appear to be identity of parties.  EEL also accepts that Jump may set-off that claim against EEL’s present

claim against Jump.  Mr Davidson accepts liability for $1,598.69 (that amount is comprised of five out of the eight invoices claimed at MBA 7 of Mr Allerby’s affidavit plus liability for four further invoices which have been rendered to EEL since Mr Allerby swore his affidavit and further liability for unpaid telephone bills).

[42]     Turning, next to the relationship between Jump and the Allerby Family Trust, I am satisfied that the loans made by the Allerby Family Trust here are sufficiently unusual for Jump to claim equitable set-off.  The Allerby Family Trust (Mr Allerby and a Mr McBride are  listed  as  shareholders,  presumably  as  its  trustees)  is  Jump’s  only  shareholder. Envirogroup is in the same operational group of companies as EEL with a close financial relationship between the two companies.     Although no reason is provided for those transactions, from the general background set out in both parties’ affidavits in support, I infer that the money was to provide a general operating surplus, similar to the advances from EEL to Jump.  By the Allerby Family Trust lending money to both EEL and Envirogroup, I am satisfied that for present summary judgment purposes, those transactions are of a close and   sufficient  connection  with   the   present   claimed   funds   such   that   it  would   be unconscionable to ignore those claims in considering a claim against Jump by either EEL or Envirogroup.   Or alternatively, on the facts as they are, (in other words without detailed evidence as to the specific purpose of the transactions) I am not prepared to decide whether this case is sufficiently analogous to that in Hamilton Ice Arena to grant summary judgment.

[43]    Finally, I turn to consider Mr Allerby’s claims against Mr Davidson for mismanagement of the companies.  While not disclosed in this way, these claims must be brought  in Mr Allerby’s capacity as a discretionary beneficiary of the Sea Dog and Barnacle Trust, a substantial shareholder.   Bringing claims in that capacity, however, it is difficult to see here how Mr Allerby can argue that those claims have a sufficient connection to the present claim.

Conclusion

[44]     Although clearly here Jump is required initially to put before the Court sufficient material to show that it has a claim by way of equitable set-off that so affects the claim of EEL that it would be unjust to decide one claim without taking the other into account, this being a summary judgment application, the final onus still rests on EEL to show that Jump has no arguable defence in the sense that there is no real question to be tried.

[45]      In the present case I am of the view that the overarching reality is that there is a high level  of  interconnectivity  between  all  the  businesses  mentioned  in  this  judgment  and

operated by Mr Allerby and Mr Davidson and a significant intermingling of their affairs.  I reach the conclusion that it is arguable here that Jump may have an equitable set off between the claim against it and the various claims by the Allerby Family Trust, Envirogroup and Jump against EEL.  What may well be a rather sorry saga between all these parties as I see it needs to be unravelled properly rather than considering just one aspect.  I cannot dispel here the conclusion that to look at the EEL loan in isolation might very well lead to some injustice.

[46]     That said, I am not minded here to exercise my discretion and allow summary judgment because I consider that EEL has not done enough to satisfy me that Jump has no arguable defence to the claim against it.

[47]      For these reasons summary judgment is refused.

[48]      Costs are reserved to be dealt with on ultimate disposal of this proceeding.

[49]      The Registrar is directed to list this matter for call and the next Associate Judge’s

Summary Judgment List to address directions required to proceed the matter to trial.

‘Associate Judge D.I. Gendall’