Export Finance Limited v Mellsop
[2017] NZHC 2908
•24 November 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-001116 [2017] NZHC 2908
BETWEEN EXPORT FINANCE LIMITED
Plaintiff
AND
IAN DONALD MELLSOP First Defendant
AND
MARINESCAPE PROJECTS LIMITED Second Defendants
AND
AQESS LIMITED Third Defendants
AND
KEA PROPERTIES INDIA LIMITED Fourth Defendants
Hearing: 2 October 2017 Appearances:
D Grove for the Plaintiff
P Shackleton for the DefendantsJudgment:
24 November 2017
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 24 November 2017 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Ellis Law, Auckland
Meredith Connell, Auckland
D Grove, Auckland
EXPORT FINANCE LTD v MELLSOP & Ors [2017] NZHC 2908 [24 November 2017]
Introduction
[1] This is, in my view, a simple case where summary judgment is the appropriate mechanism for enforcing a contractual debt.
[2] The basis of the plaintiff’s claim for summary judgment is a Deed entered into between the parties on 21 February 2014. On its face, the Deed entitles the plaintiff to its claim for $320,487.95 (comprising the principal sum of $167,335.98 plus interest on that sum for late payment). The plaintiff also seeks accumulating interest on the basis that it is entitled to such at the default rate of 25% per annum, calculated daily.
[3] The defendants accept they are parties to the Deed. They submit, however, that they have arguable defences to the plaintiff’s claim, or alternatively, that the Court should exercise its residual discretion in the plaintiff’s favour. At the core of their defences is the contention that prior to entering the Deed, there was an oral agreement to cap the total debt to be repaid, and to delay the timeframe for repayment.
Background
[4] The first defendant, Mr Mellsop, has had a long career in aquarium related work dating back to the construction of the renowned Kelly Tarlton Aquarium in
1985. He is the founder and managing director of the Marinescape Group of companies which design, construct and manage aquariums. The other defendants are corporate members of the Group.
[5] The defendants are currently undertaking construction of a new aquarium development in Chennai, India (the Chennai project). Mr Mellsop hired the plaintiff, Export Finance Ltd, to assist with funding for the project, and then to act on the sale of shares he held in a Thai aquarium to release additional funds.
[6] It is common ground that Mr Mellsop was unable to meet the plaintiff’s fee
for the sale of shares. That debt summed to over $450,000.
[7] It appears that Mr Mellsop enjoyed a personal friendship with the plaintiff’s director, Mr Fitzsimmons. Certainly, Mr Fitzsimmons took an accommodating approach to the defendants’ indebtedness.
[8] To settle the plaintiff ’s claim for the success fee and outstanding invoices, the plaintiff entered into three consecutive Deeds with Mr Mellsop, and entities associated with him. It was the defendants’ continually defaulting on each deed that made each successive Deed necessary.
[9] The original Deed is not in evidence, and is not so relevant for this
proceeding. This second Deed was prepared by Mr Mellsop’s solicitor on 18 June
2013. In both Deeds, the Marinescape Group companies were identified as the providers of future income streams to meet payments under them.
[10] The third, and current Deed was entered into on 21 February 2014. As before, the Deed aimed to reduce payments down to a manageable level. Specifically, it was calculated based on Mr Mellsop’s advice as to the Marinescape Group’s projected cashflow from ongoing business operations.
[11] The current Deed was not prepared by a solicitor, but its wording is identical with the second Deed except for a new Payment Schedule providing for mandatory monthly payments. Under the current Deed, the Marinescape Projects Ltd (second defendant) is liable to pay.
[12] On 30 April 2014, Mr Mellsop made his one and only part payment of $3,000 pursuant to the Payment Schedule. No further payments have been received.
[13] It appears Mr Fitzsimmons nonetheless still took a constructive attitude towards Mr Mellsop, even arranging and making advances to him personally and to his family. These proceedings were not issued until June 2017. Mr Fitzsimmons deposes that the final straw was when he realised Mr Mellsop had applied some tens of thousands towards repairing his boat while continuing to default under the Deed.
[14] As at 30 May 2017, the amount owing under the Deed was $320,487.95, but interest continues to accumulate.
The Deed
[15] The Deed is a short document, and it is helpful to include the material provisions. The Deed comprises a background, core or operative provisions, and an accompanying payment schedule.
[16] The background includes the following provisions:
(1) Ian is a director of Marinescape Management, and a manager of Nautica, and has been involved in a business relationship with Export Finance.
(2) The parties have agreed to enter into this deed as part of a resolution of matters which have arisen in the course of the said business relationship.
(Italics added).
[17] The operative provisions materially provide that:
(a) The second defendant is to pay to the plaintiff the principal sum of NZ$167,335.98 by 24 monthly payments of NZ$8,354.10, commencing on 30 April 2014 and thereafter on the 30th day of each succeeding month (or the last day of February), together with interest at the rate of 18% per annum calculated daily on the outstanding balance of the principal sum from time to time as at the date of each payment, as set out in the Schedule to the deed.
(b) All payments to be made to the plaintiff in New Zealand currency at its nominated bank or such other bank as it may nominate from time to time.
(c) Notwithstanding (a), the second defendant may at any time:
(i) Pay the plaintiff the full amount of the outstanding balance of the principal sum; or
(ii) Pay any part of the outstanding balance of the principal sum in multiples of NZ$20,000 on any due date for payment, and interest shall cease on the repaid amount as from the date of payment.
(d) If the second defendant defaults for a period of more than 10 banking days in making any payment due under (a), the plaintiff
may, without prejudice to any other rights it may have, demand immediate payment of the balance of the principal sum, and upon service of such demand, the second defendant’s obligation to pay the principal sum (or so much of it as remains outstanding) shall be accelerated.
(e) Interest shall accrue on any monies due after default at the rate of
25% per annum, calculated daily.
(f) Mr Mellsop and the third and fourth defendants jointly and severally guarantee the due and punctual performance of the second defendant’s obligations under the deed; and payment of the monies due from it under the deed.
(g) Mr Mellsop separately indemnifies the plaintiff against any loss it may suffer from any default under the current deed, but limited to the amount payable under the current deed at the time of the default.
(h) Any failure or delay by the plaintiff to exercise its rights under the deed do not operate as a waiver of its rights.
(i) The deed is governed by the laws of New Zealand.
[18] The Schedule is the only difference between the current Deed and the second Deed. It contains a schedule of 24 payments of $8,354.10, the first having a due date of 30 April 2014 and the last having a due date of 31 March 2016.
Summary judgment principles
[19] The summary judgment principles were summarised by the Court of Appeal in Krukziener v Hanover Finance as follows:1
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 at 341 (PC). 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).
1 Krukziener v Hanover Finance [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
Discussion
The plaintiff ’s onus
[20] There is no doubt in my mind that the plaintiff has established a sufficient evidential foundation to support its claim for relief. The terms of the current Deed are unambiguous, and on its face, entitle the plaintiff to the remedy it seeks.
[21] The second defendant, the Marinescape Projects, is liable to pay the outstanding sum under the contract; and there is no dispute that the first, third and fourth defendants are all jointly and severally liable.
[22] The onus therefore passes to the defendants to demonstrate a tenable defence
to plaintiff’s claim.
The defendants’ arguments
[23] The defendants raise five defences to the plaintiffs’ claim, namely that:
(a) There was an oral contract to delay payment obligation and to cap the debt;
(b)The plaintiff is estopped from enforcing the current deed as a result of its representations that payment could be delayed;
(c) The current Deed is oppressive under the Credit Contracts and
Consumer Finance Act 2003 (CCCFA);
(d) The default interest rate of 25 per cent is a penalty and unenforceable; (e) The court should exercise its residual discretion to refuse summary
judgment to avoid an injustice to the defendants.
[24] I consider the alleged oral contract or representation highly implausible. The defendants’ contention is that Mr Fitzsimmons represented, or else he and Mr Mellsop agreed, that:
(a) No payments would be payable under the Deed until the defendants received payment for Acrylic panels in relation to the Chennai construction project;
(b)The plaintiff would take no steps to enforce the current Deed so long as the Chennai Project proceeded;
(c) The total interest on the debt would be capped.
[25] In his affidavit Mr Fitzsimmons denies making such a representation or agreement, so we are left with conflicting affidavit evidence. However, a court is not obliged to accept all evidence uncritically. Mr Mellsop’s affidavit evidence lacks the “aura of credibility”, in my view, for a couple of reasons:2
(a) There is no documentation or other evidence supporting such a contention. Indeed, the details of the alleged oral agreement are vague and imprecise; for instance, Mr Mellsop does not specify at what amount the debt would be capped.
(b)It is inherently implausible that Mr Mellsop and Mr Fitzsimmons would draw up a new Deed, and calculate a repayment plan for the debt, only to then enter into a different and contradictory agreement on the side. Even if he and Mr Fitzsimmons were good friends (as Mr Mellsop suggest), such a friendship is more plausibly seen in Mr Fitzsimmons’ decision not to enforce his contractual rights.
[26] There was some discussion at the hearing about the introductory statement in the Deed that the parties have entered into it “as part of a resolution of matters that have arisen…”. It might be said this phrase indicates that there were
contemporaneous, even contradictory, arrangements for the resolution of the debt. But the Deed makes no reference to any extraneous arrangement, and the defendants have not discharged the onus of laying an evidential foundation for this possibility. There is therefore no basis to suppose that the deed did not definitively resolve but one of a number of “matters”, namely the resolution of the debt.
[27] The pleading under the CCCFA is vague, but in any case, I do consider the Deed in any way “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.3
[28] The defendants’ strongest argument concerns Mr Mellsop’s lack of legal representation at the time of signing the Deed. But Mr Mellsop was a sophisticated and experienced businessman, the Deed was fairly straightforward, and it was all but identical to the second Deed prepared by his solicitor. I do not consider the Deed amounts to oppression in those circumstances.
[29] I do not consider the default interest rate of 25 per cent oppressive or a penalty. The parties agreed to it as experienced business people with their eyes open. At the time of signing (and absent the benefit of hindsight) it is not unreasonable to say the default interest provision is a genuine estimate of the plaintiff’s loss.
[30] Finally, I am not persuaded there is any reason to exercise the court’s residual discretion in Mr Mellsop’s favour. Counsel for the defendants conceded at the hearing that entering judgment against the defendants would not, as previously pleaded, result in the termination of the Chennai project. Only bankruptcy triggers such a termination, and so any potential injustice is a question for this court to decide in the bankruptcy context. In any case, the Chennai project is extraneous to this application, and I do not see any reason for this court to tolerate Mr Mellsop’s continued defaulting any longer. It may well be that the plaintiff will be persuaded that it is in its interests to indulge the defendants further and to defer enforcement, but that is not a reason to deny the plaintiff summary judgment.
[31] In sum, the defendants raise “hypothetical possibilities in vague terms unsupported by any positive assertions or corroborative documentation”.4 Such defences cannot frustrate the plaintiff from discharging its onus that summary judgment is the appropriate vehicle for enforcing the contractual debt.
Result
[32] Summary judgment is entered against the defendants for the full amount of its claim as follows:
(a) The outstanding principal sum of $320,487.95 owing under the Deed of 21 February 2014.
(b) Interest at the rate of 25% per annum calculated daily from
30 May 2017 until the date of judgment.
[33] As costs follow the event under the statutory costs regime, the defendants are to pay the plaintiff 2B costs plus disbursements as fixed by the Registrar. Leave is reserved to file memoranda in the event that there is any disagreement as to the
calculation of interest or costs.
Associate Judge Sargisson
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