England v Yee

[2013] NZHC 1636

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-006079 [2013] NZHC 1636

BETWEEN  PETER MICHAEL ENGLAND Plaintiff

ANDJAMES YEE Defendant

Hearing:                   12 April 2013

Appearances:           J B Murray for Plaintiff

B Cunningham for Defendant

Judgment:                2 July 2013

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment Application)

This judgment was delivered by me on 2 July 2013 at 11 am pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

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

ENGLAND v YEE [2013] NZHC 1636 [2 July 2013]

Introduction

[1]      The plaintiff in this proceeding, Mr England, applies for summary judgment on his claim for payment of a debt of $730,000 plus interest on that sum under s 87 of the Judicature Act 1908.

[2]      The basis of Mr England’s claim for $730,000 against Mr Yee, the defendant, is threefold.  First, a deed of acknowledgement of debt was entered into between the parties on 29 November 2007.  Pursuant to this deed Mr England lent $560,000 to Mr  Yee  on  terms  that  upon  payment  Mr  Yee  would  pay  a  further  $300,000 comprising capitalised interest, such payment to occur on sale of Mr Yee’s property at St Mary’s Bay.  Secondly, a deed of modification of the acknowledgement of debt that the parties entered into on 28 March 2010.  Thirdly, that between 4 August 2008 and 23 July 2012 Mr Yee made payments totalling $110,000 and on 3 October 2012 he paid a further $20,000.  This leaves $730,000 of principal and capitalised interest owing, being the sum that Mr England now claims.

[3]      Some years have passed since Mr England made the loan to Mr Yee.  Mr Yee has paid $130,000 of the total debt of $860,000.   The total debt comprises of the principal amount and the capitalised interest.  Mr England wants the balance without further delay. He says payment is overdue and that Mr Yee was obliged to sell the property to pay him.  He says the due date was by the end of June 2010 at the latest. Mr Yee says payment is not due and that Mr England must wait until either he elects to sell the property or dies.

[4]      Counsel agree that the onus is on Mr England to show that Mr Yee has no defence to his claim for summary judgment and that the primary issues on which the application turn are: on a correct construction of the two deeds what did the parties intend as to the due date for repayment of the principal plus the capitalised interest; and based on that construction is payment overdue.

[5]      Assuming the date for payment has come due there is an ancillary issue about the entitlement to Judicature Act interest which I will return to presently.

The two deeds

[6]      The deed of acknowledgement of debt is a short document. Its operative provisions state (emphasis added):

(a)       The sum of $560,000 advanced ...shall remain outstanding as a debt

(“Debt”) payable by the Borrower to the Lender.

(b)       The  debt  shall  be  repaid  along  with  a  further  $300,000  comprising capitalised interest on the sale of the Borrower’s property at ...St Mary’s Bay, Auckland...

(c)       The Debt shall include any further advances which may be made by the

Lender to the Borrower after the date of this deed...

[7]      As set out in the second operative provision of the deed, in November 2007 the parties agreed that the debt is to be repaid along with capitalised interest of

$300,000 “on the sale” of Mr Yee’s property at St Mary’s Bay.  The deed does not expressly state  when  the  property is  to  be  sold  for  the  purpose  of  making  the necessary payment. Additionally there is nothing in the introductory part of the deed that bears on the issue.

[8]      The deed of modification of acknowledgement of debt is also a relatively brief document. It provides (emphasis added):

Introduction

a)       By Deed of Acknowledgement of Debt dated 29th November 2007 the borrower acknowledged that he had borrowed $560,000 from the lender (“Deed”) and that the debt shall be repaid along with a further $300,000 comprising capitalized interest (“debt”) on the sale of the borrower’s property at ...St Mary’s Bay ..;

b)The borrower has repaid part of the debt and the parties wish to record that repayment as well as certain other variations to the original deed of acknowledgement of debt by way of this Deed.

Operative provisions

1)The borrower acknowledges that the borrower owes to the lender the debt recorded under the terms of the original Deed of Acknowledgement of Debt.

2)The lender acknowledges that $60,000 of the debt has been repaid by the borrower.

3)The  borrower  hereby  agrees  to  mortgage  the  property  to  the  lender  as security for the debt and the capitalised interest and the borrower will, if called upon by the lender, sign an authority and instruction form for registration of a mortgage in favour of the lender to allow registration of a mortgage over the property.

4)The borrower grants to the lender the non-exclusive right to occupy the property along with the borrower until the debt is repaid in full or the is property sold, whichever was sooner, and the borrower would alter his last will and testament to provide for the lender to have an exclusive right of occupation even after the borrower has died, such right of occupation to subsist until the debt is repaid in full.

5)        The debt shall be repaid on demand in the event of the borrower’s death.

[9]      The stated purpose of this deed is to record the total amount that Mr Yee has made by way of repayment and to record certain other agreed variations to the original deed.  These variations in essence provide Mr England with the right to a mortgage security for the balance still owed to him, and confer on him specific rights of occupation pending the sale of the property and additionally in the event of Mr Yee’s death.  Materially, the last operative provision of the second deed confers on Mr England a new right to payment of the debt on demand in the event of Mr Yee’s death.

[10]     The combined effect of the two deeds on the time that payment is due is at the heart of the parties’ dispute. Plainly, Mr England retains the right to payment on the sale of the property but should Mr Yee die not having sold and paid (or chosen to pay by other means) Mr England has the additional right to payment on demand.1  At issue however is whether the time for the sale and payment is a matter of election or obligation.  Put another way, what is the parties’ intention as to the time or due date

for sale and payment, objectively expressed by the terms of their agreement in the first deed, and what is the effect of the second deed on that agreement?

[11]     Mr England claims as the first and second deeds are silent on the time of the sale, the law implies an obligation that sale and payment must be completed within a

reasonable time in the circumstances. Counsel for Mr England submits that such time was, in the circumstances, the end of June 2010 at the latest.

[12]     Mr Yee does not dispute that both deeds contemplate that he is to sell the property to pay what he owes to Mr England but he claims that he has not agreed to a time frame for sale or payment.   Counsel for Mr Yee submits that neither deed specifies a time for sale. He submits this shows that the time of sale and payment is a matter of election and necessarily indeterminate.  The second deed however affords certainty of repayment for Mr England in that it affords a right to payment on demand when Mr Yee dies. In essence the submission is that the time for payment does not come due until Mr Yee dies, unless he chooses to sell the property in his lifetime.

[13]     I turn then to the issue of whether under the deeds the parties’ intention, objectively expressed, is that the time for sale and payment is a reasonable time in the circumstances or when Mr Yee dies or earlier elects to sell the property.  I pause first to set out the material factual background.

Background

Factual Background

[14]     The circumstances in which the parties entered into the first deed and then agreed to modify it by entering into the second deed are set out in Mr England’s affidavit evidence and are not in dispute, save as to whether he has committed to a time frame for sale and payment.

[15]     In his evidence Mr England sets out that the money used for the loan of

$560,000 is all the money that he owns and that it was acquired by him in about

2007 by inheritance. He was living in England at the time and his friend Mr Yee contacted him and asked for a loan to enable him to satisfy an order of the Family Court in favour of Mr Yee’s estranged partner. She had placed notices of claim against the titles to two properties Mr Yee owned, one in St Mary’s Bay and one in Pt Chevalier, and she was living in one of them.  He wanted to pay her out in order to

secure removal of the notices and vacant possession of the Point Chevalier property. It was agreed between Mr England and Mr Yee that Mr England would make the loan.  Additionally, that Mr Yee would repay it with an additional $300,000 when he sold the St Mary’s Bay property which would be put on the market after Mr Yee’s former partner had moved out of the Pt Chevalier property and removed the notices.2

[16]     Mr Yee arranged for his solicitor to prepare a draft deed of acknowledgement of debt.  The provision in the draft that payment of the loan was to be on demand was deleted by agreement, as it did not suit Mr Yee.

[17]     Though the parties did not agree an exact timeframe for the sale before entering into the deed it is not in dispute that Mr Yee indicated his intention to get the property ready for sale.  Based on this advice Mr England expected the date of payment to be a year or two years at the most.  Nor is it in dispute that Mr England was told by Mr Yee that he could live with him for the rest of his life if need be, because he (Mr Yee) had retired and would be occupied “travelling the world.” Mr England says this was a material reason why he agreed to the loan.

[18]     Once the deed was signed Mr Yee paid out his former partner, and secured release of the remaining notice of claim.  Mr England also moved into the St Mary’s Bay property and began living with Mr Yee.

[19]     By January 2010 Mr Yee had not taken steps to sell the property and Mr England was concerned about the time that it was taking for payment to occur.  Mr England wrote a note to Mr Yee expressing his concerns.   He noted that he had spoken to Mr Yee a couple of times about what would happen to him “if you drop dead suddenly, and these [concerns] have not really been resolved”.  He wanted to know what the problem was in putting the property on the market straight away.

[20]     Nothing happened with respect to the sale of the property and Mr Yee and Mr England went to the United States to help another friend who was renovating rental properties. On return to New Zealand Mr England asked Mr Yee for some of the loan

back and told him he “had to have some way” to get his money back.  Mr England says that Mr Yee:

...agreed he would put the house on the market by the end of 2010.   He said he wanted to wait until the property market recovered to July 2007 levels.  He said if he got $2 million for the property, he would give $1 million of this to me, but I could still live in one of the ... properties as long as I wanted rent-free, although I would have to pay rates and insurance.

[21]     The result was that the parties agreed to enter into the second deed which they executed in late March.  This deed is notated as prepared by the same solicitors as Mr Yee used to prepare the first deed.

[22]     In the period from March to December 2010 there was no progress.   By January 2011 there had been no sale. Mr England wrote reminding Mr Yee that in early 2010 he agreed “to put the property on the market by year end or at the very latest the summer of 2011”.  Little or nothing happened until Mr England emailed Mr Yee on 8 October 2011 giving notice that he wanted Mr Yee to give him “a date when you will repay the loan”.  He explained that when the agreement was made “the period indicated by you” was expected to be “less than a year”.  He concluded by giving notice that he wanted payment of the loan by 30 November 2011 and demanding that Mr Yee either sell the house by auction or go to the bank and get a mortgage.

[23]     Though Mr Yee replied with a curt note, essentially telling Mr England to clean  and  tidy up  the  bathroom  and  the  kitchen  at  the  property,  Mr  England’s entreaties were met with tacit acknowledgement as the following developments indicate:

(a)       In mid-December 2011 Mr Yee listed the property for sale with a local real estate agency.

(b)In March 2012 Mr Yee offered the property for sale by tender but no sale eventuated.

(c)      On  20  September  2012  Mr Yee  offered  the  property  for  sale  by auction but the property did not attract any offer or interest.

(d)On 10 October 2012 Mr Yee received an offer for the property from his neighbour who was seeking to buy or alternatively to obtain Mr Yee’s   consent   to   a  modified   flats’  plan  to  reflect   “consented alterations” to the property (the property was subject to cross leases to Mr Yee and his neighbour).

(e)      On 10 December 2012 Mr Yee received an offer to purchase from a Mr Baldwin. The offer price was accepted by Mr Yee but the deal fell through because of issues with the title.  (The purchaser wanted to be satisfied that he had the ability to change the title to a fee simple title).

[24]     During the period when Mr Yee made moves to sell the property, the parties were in discussion over the necessary arrangements to provide Mr England with the mortgage he was entitled to under the terms of the second deed.  (Counsel for both parties confirmed at the hearing that  a mortgage in favour of Mr England was ultimately registered against the title to the property). In the meantime on 23 July

2012 Mr England’s solicitor wrote to Mr Yee reminding him that he agreed to put the property on the market by the end of the 2010 year or no later than summer 2011. He advised that Mr England “considers that the timeframe for re-payment of the loan has passed, so that the balance of the loan and interest is now due”.  He also gave written notice to Mr Yee in the following terms:

By this letter Mr England makes formal demand ...for payment of the loan of

$560,000  and  the  balance  of  the  agreed  interest  of  $190,000  making  in  total

$750,000. He is prepared to allow you a further timeframe to obtain those funds, and nominates Friday, 31 August 2012 for that purpose.

[25]     Mr Yee did not pay $750,000 as demanded.  On 3 October he paid a further

$20,000.  He has paid nothing further.

Is the time for sale and payment, a reasonable time in the circumstances or is the time for sale and payment when Mr Yee dies or earlier elects to sell the property?

[26]     There is no dispute as to the principles that govern summary judgment.  The legal principles are succinctly expressed by the Court of Appeal in Krukzeiner v Hanover Finance Limited: 3

(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... The Court must be left without any real doubt or uncertainty.

(b)       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.

(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.

(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.

(e)       Under r 141A4 the defendant need not file a statement of defence.  The onus remains on the plaintiff, and summary judgments will be denied if on the hearing of the application it appears that there is an issue worthy of trial.

[27]     I am satisfied the issue as to the time for sale and payment is not worthy of trial.   I agree with counsel for Mr England that objectively viewed the parties’ contractual intention is not merely that Mr Yee has an obligation to pay the debt when he sells the property.  The contractual intention includes that payment and sale must  take place within  a reasonable time, unless  of  course  Mr Yee  chooses  to complete payment from other sources as he has done in respect of the $130,000 that he has already paid.

[28]     I am satisfied in respect of the first deed, silent as it was on the date for the sale that is implied that sale and payment must take place within a reasonable time in

the circumstances.  Under the deed Mr Yee is obliged to make payment on sale and

3 Krukziener v Hanover Finance Limited [2008] NZCA 187, [2010] NZAR 307, (2008) 19 PRNZ 162 (CA) at [26].

4 Now High Court Rule 12.10.

sale is the only event that triggers the time payment comes due. It would make no sense if Mr Yee was free of an obligation to make the very sale on which the obligation to pay depends and if he did not have to make the sale within a time that is reasonable. In this respect it is notable that the deed was drafted by Mr Yee’s solicitor.

[29]     As Asher J stated in Cemix Ltd v Flowcrete Asia “[i]t is trite law that if no time is stipulated for the performance of an obligation in a contract, generally that obligation must be performed within a reasonable time.”5

[30]     The principle is also stated in Portside Apartments Ltd v Breakers Gisborne Ltd. The Court held that where the time for performance of a contract is not stipulated, “the law implies that performance must be completed within a reasonable time, having regard to the circumstances of the case.”6

[31]     If, as Mr Yee contends, he did not agree on a timeframe for sale and payment the law will imply a reasonable time.

[32]     I do not therefore accept the claim that Mr Yee did not agree to a timeframe for sale and payment, and that the parties’ intention was that he would have no obligation to effect sale and payment unless he chooses.  Certainly, at the time the parties entered into the first deed the common intention was that there would be a sale. This is sufficient to fix Mr Yee with an obligation to sell so as to make payment within a timeframe that was reasonable in the circumstances.

[33]     I am also satisfied that the second deed does not negate that obligation or free Mr Yee of it.  On a plain reading of the second deed its operative provisions do not extinguish, negate or contradict the second operative provision in the first deed. Materially, the last operative provision of the second deed provides additionally that should Mr Yee die Mr England has a new right to payment of the debt on demand.

The combined effect is that should Mr Yee die (not having either sold the property to

5 Cemix Ltd v Flowcrete Asia SDN BHD HC Auckland CIV-2006-404-1537, 2 April 2008.

6Portside Apartments Ltd v Breakers Gisborne Ltd (2008) 9 NZCPR 578, at [30] citing Mt Pleasant

Estates Co Ltd v Withell [1996] 3 NZLR 324, 329; Peddle v Orr [1906] 26 NZLR 1240, 1251.

make payment or chosen to pay by other means) then Mr England has the additional

right to payment on demand.

[34]     I come next then to whether there has been a reasonable time for completion of sale and payment.

Has there been a reasonable time for sale and payment?

[35]     What is a reasonable time turns on the circumstances; it is fact dependent. It is also for Mr England to demonstrate. He claims the end of June 2010 at the latest was more than reasonable.

[36]     The Court of Appeal in Hunt v Wilson said that where no time is specified for fulfilment of a condition, a reasonable time is allowed and in the event of a delay notice must be given, making time of the essence.7

[37]     A reasonable time requires that Mr Yee should have a reasonable time to make  reasonable  endeavours  to  sell.    The  High  Court  of Australia  in  Perri  v Coolangatta Investments Pty Ltd held that in an agreement for sale and purchase, a condition that the agreement would not be completed until the purchasers had sold their home required the vendors to give the purchasers a reasonable time to make reasonable endeavours to sell the property.8   The principle is equally apposite here.

[38]     I  am  satisfied  in  the  circumstances  of  this  case  that  there  has  been  a reasonable time for Mr Yee to sell the property and to make payment.   I agree however with counsel for Mr Yee that notice is required to fix a date for payment but I do not agree with his submission that appropriate notice has not been given.

[39]     Putting aside momentarily the issue of notice it is plain that Mr Yee was to have a reasonable time to sell, once both notices of claim had been removed and his former partner had vacated the Pt Chevalier property, without his being unduly pressured.  When Mr England and Mr Yee discussed the arrangements for the loan in

2007 this was common ground between them and it is consistent with the substantial

7 Hunt v Wilson [1978] 2 NZLR 261.

amount of capitalised interest that the parties agreed to. At the hearing counsel for Mr England recognised that this was the position.  Mr England himself anticipated that a sale would take time.  His own assessment of what was a reasonable time was up to two years.   Then in early 2010 before the second deed was signed the understanding was that the property would go on the market by the end of the year or the summer of 2011 at the latest.  It is clear that Mr Yee thought the property market would have recovered to 2007 levels by then and that he wanted to try to get the best price he could.   There is however no suggestion in the evidence that indicated he would not proceed if he was not satisfied with the state of the market by the summer of 2010.

[40]     Counsel for Mr England points out that the notices of claim were removed from St Mary’s Bay and Pt Chevalier properties in late 2006 and early 2008.  He also points out that the uncontroverted evidence is that Mr Yee himself said in early 2010, before the parties entered into the second deed, that he would put the property on the market by the year end or at the very latest by the summer of 2011. Counsel submits that on this basis, by any objective standard a reasonable time to sell and to make payment has well and truly passed by June 2011, allowing for six months to sell after the property should have gone on the market.

[41]     I accept that these circumstances indicate plainly that “a reasonable time” to sell and make payment would be around early 2011, or as the statement of claim alleges, by June 2011 at the latest.  However, it was not until the end of 2011 that Mr Yee listed the property for sale. Mr Yee offers no explanation for the delay other than to assert that he did not agree to a timeframe for repayment and was trying to sell at a price close to the rating value as at July 2011.  What that indicates to me is that Mr Yee took lightly his obligation to make payment within a reasonable time and that he failed to make any endeavours to sell the property until well after the time that was reasonable.   Furthermore the extended date nominated by Mr England in his solicitor’s letter of 23 July 2012 for payment came and went without reasonable endeavours being made.

[42]     When in 2012 Mr Yee did eventually make endeavours to sell the property by tender and auction he makes no suggestion that he offered an explanation to Mr

England as to why they were unsuccessful or to show that the process in each case was reasonable and designed to attract buyers at fair market value.  He offers no such explanation in evidence.  He gives no details of the terms of the tender or auction, or as to whether he set realistic reserves and undertook adequate marketing to attract buyers.   Relevantly, counsel for Mr Yee did not rely on these steps to establish a foundation for a defence based on reasonable endeavours.

[43]     The same pertains to the offer that fell through in late 2012.  There is nothing in  Mr  Yee’s  evidence  to  suggest  that  he  took  reasonable  steps  to  satisfy  the conditions attaching to the offer.

[44]     I find in the circumstances that it is inherently improbable that Mr Yee was unable to find a buyer at fair market value over the period between 2008 and end of

2012.   I am satisfied that there was reasonable time, indeed ample time, between November 2007 and the end of June 2011 for Mr Yee to fully test the market, to effect a sale at fair market value and to make payment.

[45]     I also find that there was ample time for him between June 2011 and 31

August 2012 (the extended date nominated by Mr England’s solicitor for payment)

to fully test the market, effect a sale at fair market value and to make payment.

Has notice fixing a date for payment been given?

[46]     In accordance with Hunt v Wilson notice must be given to make time of the essence in cases where no time has been specified and a reasonable time has expired. It is necessary to specify a time as “it is undesirable that the rights of the parties should rest definitely and conclusively on the expiration of a reasonable time, a time notoriously difficult to predict.”9

[47]     The notice establishing the specific time must not be premature, and must give a sufficient period for fulfilment.10     Only once this notice has been given, can

non-performance by the stipulated date be regarded as repudiation or breach.

9 Hunt v Wilson [1978] 2 NZLR 261 at 273.

[48]     I find the notice Mr England gave on 8 October 2011 demanding sale and payment by 30 November of that  year was not premature.   There could be no surprise or reasonable complaint on Mr Yee’s part when he received the notice.   I also find the notice was sufficient to specify a time for fulfilment and that it gave an appropriate fulfilment period.  However, given the extension of time that was given by Mr England’s solicitor to 31 August 2012, I find the due date for payment was 31

August 2012 and that Mr Yee fell into default of his obligation to repay the sum demanded of $730,000 as from that date.

[49]     As will be clear, I do not accept Mr England’s submission that the due date was the end of June at the latest.   However, I do not see that as disqualifying Mr England’s entitlement to summary judgment. I would allow any amendment to the due date for payment in the statement of claim, as necessary.   There need be no injustice to Mr Yee.

Conclusion

[50]     For the reasons discussed I am satisfied that Mr England has demonstrated that Mr Yee has no defence to that part of the claim seeking payment of $730,000.

Judicature Act Interest

[51]     I turn to the claim for statutory interest under s 87.11

[52]     In  his  statement  of claim  Mr England claims  s  87  interest  “on  the sum

outstanding  as  at  30  June  2011  until  the  date  of  judgment,  after  deduction  if

11 The Judicature Act 1908, s 87 states:

In any proceedings in the High Court...for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding [[the prescribed rate]], as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:

Provided that nothing in this subsection shall—

(a)      Authorise the giving of interest upon interest; or

(b)      Apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement, enactment, or rule of law, or otherwise; or

(c)      Affect the damages recoverable for the dishonour of a bill of exchange.

payments made by the defendant between 17 September and 3 October 2012.” In

effect he seeks statutory interest on $730,000.

[53]     I accept the submission of counsel for Mr Yee that under the terms of the deeds, the parties have made their own arrangements for interest and that any entitlement to interest under s 87 could only be to interest on the principal (or the balance) and not on capitalised interest, and that such entitlement could only be claimed from the date when repayment of the principal (or the balance) became

overdue.12

[54]     It is therefore necessary to determine whether the various payments that Mr Yee did make over the period 4 August 2008 and 3 October 2012 were payable in reduction of the loan amount or capitalised interest.

[55]     Mr England sets out in his statement of claim and verifies by affidavit that despite his solicitor’s demand of 23 July 2012 for payment of “$560,000 and the then balance of the capitalised interest of $190,000” the demand was not met (save for  the  further  payment  of  $20,000,  making  total  payments  of  $130,000).  The essence of the pleading is that payments of $110,000 made were in reduction of the capitalised interest followed by a further payment of $20,000 but that nothing else has been paid despite demand.

[56]     In his statement of defence Mr Yee admits the allegation.  He takes no issue with the breakdown of the outstanding amounts of the loan or the capitalised interest. Additionally, there is nothing in the evidence of a contemporaneous nature that suggests the payments were in reduction of interest or suggestive of the breakdown in the solicitor’s demand as challenged.  Despite this, Mr Yee asserts in evidence that the payments totalling $60,000 were in reduction of principal. No assertion is made as to the nature of the remaining payments. Counsel for Mr Yee submits on the basis of this evidence that $500,000 at most could attract interest under s 87.

[57]     Counsel for Mr Yee also relies on the acknowledged payment of $60,000 “of the debt” in the second operative provision of the second deed and the contrasting

term “debt and capitalised interest” in the third operative provision.  He argues the combined effect supports only one construction: that the payment of $60,000 must have been in reduction of the principal not the capitalised interest.

[58]     I agree with counsel for Mr England that this construction ignores the very clear words of the introductory provisions of the second deed.  They make plain that the term “debt” used throughout the deed is intended to refer to the original advance and capitalised interest and that the term “debt and capitalised interest” in the third operative provision is used where the term “debt” would do and is merely a slip of drafting.  In this respect it is notable that Mr Yee arranged the drafting of both deeds.

[59]     I am satisfied that in these circumstances it is appropriate to take a robust view of Mr Yee’s evidence about interest.   I do not accept that he has a tenable defence to a claim for s 87 interest based on the contention that the payments of

$60,000 were in reduction of the principal.

[60]     That leaves outstanding the question of whether the final $20,000 payment Mr Yee made on the 3 October 2012 is a reduction of the principal or the capitalised interest. The statement of claim and summary judgment application are silent on that question as is Mr England’s evidence.  The result is that though I am satisfied that there is an entitlement to statutory interest on $540,000 I cannot make a finding on a summary basis as to whether such interest is payable on $560,000. Mr England has not established that  Mr Yee has no tenable argument that the final payment of

$20,000 was payable in reduction of the loan, not the capitalised interest.

[61]     In  these  circumstances  I  propose  to  issue  this  judgment  as  an  interim judgment in which I will make an order on the claim for judgment for $730,000 while deferring any order as to interest to give the parties the opportunity to discuss and if possible to agree on the remaining issue of interest.13   Given the small amount involved, the issue is one that the parties may wish to have the opportunity to resolve without incurring the time and cost of resolution by trial.

Result

[62]     I make orders by way of interim judgment in the following terms:

(a)      I enter judgment in the sum of $730,000 being the total amount owing on the debt and the capitalised interest.

(b)Counsel are to file a joint memorandum or (failing consensus they are to file and serve separate memoranda) on the outstanding issue of interest within 5 working days of this interim judgment.

(c)      Costs are reserved in the meantime.  If the parties are unable to agree on costs then they are to set out their respective positions briefly by way of memoranda, also to be filed within the same 5 working day

period.

Associate Judge Sargisson