Flexigroup (New Zealand) Limited v Goldenberg
[2024] NZHC 3688
•6 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-1571
[2024] NZHC 3688
BETWEEN FLEXIGROUP (NEW ZEALAND) LIMITED
PlaintiffAND
JACOB EMMANUEL GOLDENBERG
Defendant
Hearing: 18 November 2024 at 10:00am Appearances:
S J McLean for the Plaintiff Defendant is self-represented
Judgment:
6 December 2024
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application for summary judgment]
This judgment was delivered by me on 6 December 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Simpson Grierson (Ben J Upton/Sam J McLean), Auckland, for the Plaintiff
Copy for:
Jacob Emmanuel Goldenberg, Auckland, Defendant
FLEXIGROUP (NEW ZEALAND) LIMITED v GOLDENBERG [2024] NZHC 3688 [6 December 2024]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Flexigroup’s application for summary judgment [9]
Mr Goldenberg’s opposition [11]
Legal principles [13]
Analysis [16]
Drawdown Agreements did not reference Master Facility Agreement [19]
Limitation on the Guarantee [23]
Goods sold at an undervalue [26]
Result [30]
Orders [31]
Introduction
[1] Flexigroup (New Zealand) Limited (Flexigroup) seeks summary judgment against Mr Goldenberg (Mr Goldenberg) in terms of its amended statement of claim.
Background
[2] Mr Goldenberg is the sole director and shareholder of Total Health Dentistry Limited (In liquidation) (THD). THD operated a dental practice before being placed into liquidation.
[3] On or about 18 November 2019, Flexigroup agreed to provide financial accommodation to THD to purchase equipment for its dental practice. Pursuant to a master facility rental agreement dated 28 November 2019 (Master Facility Agreement), THD was granted a credit facility to purchase equipment. THD subsequently entered into individual agreements with Flexigroup when drawing down funds under the Master Facility Agreement (Drawdown Agreements).
[4] Mr Goldenberg guaranteed all the obligations of THD under the agreements (the Guarantee). THD defaulted in its obligations under the agreements by failing to make monthly payments to Flexigroup when required.
[5] On 22 March 2024, Flexigroup terminated the agreements. It declared all remaining payments under the agreements as outstanding and made a written demand on THD for a payment of $377,569.98. Flexigroup also made a written demand on Mr Goldenberg for the same amount as the guarantor.
[6] Both THD and Mr Goldenberg failed to make the payments. On 11 April 2024, THD was placed into liquidation. The liquidator disclaimed THD’s interests in the equipment and the lease between THD and the landlord of the premises from which the dental practice was operated (the premises).
[7] On 21 May 2024, Flexigroup agreed to sell a selection of the equipment located at the premises to the new tenant of the premises for an agreed price of $20,000. The proceeds of the sale were applied to the THD’s total indebtedness to Flexigroup.
[8]Flexigroup now seeks payment of the outstanding amount of $357,569.98.
Flexigroup’s application for summary judgment
[9]Flexigroup seeks orders, in summary:1
(a)for summary judgment against Mr Goldenberg in terms of its statement of claim;
(b)in the alternative, for summary judgment against Mr Goldenberg on the issues of liability raised in Flexigroup’s statement of claim;
(c)if judgment for liability is given as in [9](b):
(i)for directions as to the trial of the issue of quantum;
1 Notice of interlocutory application by plaintiff seeking summary judgment at [1].
(ii)directing the time and place of the trial, and for further directions as may be required.
[10]The grounds on which the orders are sought are:2
(a)that Mr Goldenberg has no defence to Flexigroup’s claim; and
(b)the grounds appearing in the affidavit of Glen Martin Ross, filed in support of this application.
Mr Goldenberg’s opposition
[11] Mr Goldenberg opposes the application on, in summary, the following grounds:3
(a)Flexigroup has taken no action to repossess and auction the goods in order to quantify their loss;
(b)Flexigroup filed a claim with the liquidator of THD.
(c)the quantum of Flexigroup’s claim is disputed as no payments which have been made have been deducted in calculating Flexigroup’s claim.
[12] In addition to the grounds specified in his notice of opposition, Mr Goldenberg raised the following defences, as I understand them, in his submissions in opposition to Flexigroup’s application:
(a)The Drawdown Agreements did not properly reference the Master Facility Agreement and therefore arguably did not incorporate the terms of the Master Facility Agreement. In particular, Mr Goldenberg alleges he only signed the Guarantee on the basis that Part F “Payment Protect Specific Terms” was included in the Master Facility Agreement and he
2 At [2].
3 Notice of opposition to application for summary judgment dated 19 September 2024.
did not guarantee any drawdowns under the Drawdown Agreements which did not include those terms;
(b)the Guarantee only related to a credit facility with a limit of $250,000 and for a period from 18 November 2019 to 17 November 2020, and he did not guarantee any amounts beyond the credit limit or any drawdowns after the expiry date of the Facility;
(c)the goods which were repossessed by Flexigroup from THD were sold at an undervalue to the new tenant of THD’s premises and Flexigroup has not accounted for the balance of the dental equipment not sold to the new tenant.
Legal principles
[13]Rule 12.2(1) of the High Court Rules 2016 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.
[14] The relevant principles governing a summary judgment application are well established:4
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. 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. 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. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a
4 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] (citations omitted).
robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel.
[15]The wording of r 12.2 “may give judgment” indicates a residual discretion.
Having regard to the various authorities, the position appears to be as follows:5
(a)The discretion implied by the use of the word “may” is to be restrictively applied. In a great majority of cases, once the court is satisfied the defendant has no defence, there is no room for the exercise of discretion.
(b)The residual discretion may be invoked to avoid oppression or injustice to the defendant where:
(i)The proceeding involves the actions or possible liability of a third party which is not before the court;
(ii)The proceedings are such that the opportunity should be given to allow discovery or other interlocutory applications to be concluded;
(iii)The circumstances of the case disclose very unusual features, the presence of which leads the court to conclude that the entry of summary judgment would be oppressive or unjust; or
(iv)The combination of complex issues of fact and law justify the dismissal of the application for summary judgment, either as a matter of discretion or because the court cannot be satisfied that the defendant has no defence.
(c)Even where the court is not satisfied that a defence has been made out, in exceptional circumstances the application may be adjourned to allow for other processes to be followed.
Analysis
[16]The issues to be determined in this judgment are:
(i)whether any of the defences to the application put forward by Mr Goldenberg are reasonably arguable, and therefore summary judgment should be refused;
(ii)whether, if summary judgment should be given against Mr Goldenberg for liability under the Guarantee, whether
5 Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR12.2.11].
summary judgment should also be given for the amount claimed by Flexigroup, or whether quantum should be determined at a trial.
[17]Mr Goldenberg’s defences can be summarised as:
(a)the Drawdown Agreements did not properly reference the Master Facility Agreement and therefore arguably did not incorporate the terms of the Master Facility Agreement;
(b)he only signed the Guarantee on the basis that Part F – Payment Protect Specific Terms of the Master Facility Agreement – was included in the Master Facility Agreement to protect him and he did not guarantee drawdowns under the Drawdown Agreements which did not include these terms;
(c)the Guarantee only related to a credit facility with a limit of $250,000 and for the period from 18 November 2019 to 17 November 2020, and he did not guarantee amounts beyond that credit limit or drawdowns after the expiry date;
(d)the goods which were repossessed by Flexigroup from THD were sold at an undervalue to the new tenant of THD’s premises, and Flexigroup has not accounted for the balance of the dental equipment not sold to the new tenant of the premises.
[18]I deal with each of these in turn.
Drawdown Agreements did not reference Master Facility Agreement
[19] Mr McLean, for Flexigroup, submits that it is clear from the contractual documentation that the Drawdown Agreements incorporated the terms of the Master Facility Agreement. In support of this, he points to:
(a)Clause 5(a) of the Master Facility Agreement which provides:
At any time you may request that we lease additional equipment to you on the terms and conditions of this lease by signing and returning to us a completed Request for New or Additional Equipment Form (“Request”);
(b)the wording incorporated in the Request for New or Additional Equipment under the “Acceptance by Customer” which provides, at paragraph (2):
This document forms part of the Flexiline Master Rental Facility Agreement (“the Agreement”).
[20] Mr McLean submits that additional drawdowns under the Drawdown Agreements for the purchase of further equipment by THD were at the request of THD/Mr Goldenberg and required THD to sign the Request for New or Additional Equipment in each case, which was signed by Mr Goldenberg on behalf of THD and that these documents are all in evidence.
[21] As to Mr Goldenberg’s argument that he relied on Part F of the Master Facility Agreement being incorporated to protect him and that was the basis on which he signed the Guarantee, Mr McLean submits that it is clear from the documentation that Part F was not included in the terms of the Master Facility Agreement. He points to the following terms of the Master Facility Agreement which read as follows:
“Conditions Specific to your Agreement:
The Product you have selected is Lease to Own. Parts A, C and D of the Master Rental Facility Terms and Conditions apply. Parts B, E and F do not apply.”
[22] Accordingly, Mr Goldenberg’s defences that the Drawdown Agreements did not properly incorporate the terms of the Master Facility Agreements or that the Guarantee was only signed on the basis that Part F was included in the terms upon which he was leasing the equipment from Flexigroup are not reasonably arguable. It is clear from the terms of the Drawdown Agreements that on each drawdown the terms of the Master Facility Agreement were incorporated, and it is clear that those terms did not include Part F. Accordingly, this is not reasonably arguable as a defence to Flexigroup’s application.
Limitations on the Guarantee
[23] Mr Goldenberg has argued that the Guarantee only related to a credit facility with a limit of $250,000 and for a period from 18 November 2019 to 17 November 2020, and he did not guarantee any payments beyond that credit limit or the drawdowns after the expiry date.
[24] In response to this argument, Mr McLean firstly points out that the credit facility was increased to $500,000 and secondly, that each time new equipment was financed for THD, this was at the request of THD/Mr Goldenberg and recorded in the Drawdown Agreements. Mr McLean points to the terms of the Guarantee under which Mr Goldenberg guaranteed to pay all amounts owing under the Master Facility Agreement and guaranteed the performance by THD of all its obligations under the Master Facility Agreement. As discussed at [19], the Drawdown Agreements form part of the Master Facility Agreement and hence are guaranteed by Mr Goldenberg. Mr McLean submits that consequently the issues raised by Mr Goldenberg of the original credit limit of $250,000 and the original period of the credit facility expiring on 17 November 2020 are irrelevant to his obligations under the Guarantee, as the Guarantee applies to all amounts owing under the Master Facility Agreement (which properly includes amounts financed under the Drawdown Agreements).
[25] I am of the view that it is clear that the defence this not reasonably arguable by Mr Goldenberg. As I have noted at [19], additional amounts financed by Flexigroup under the Drawdown Agreements were on terms of the Master Facility Agreement, and the period of the facility was clearly extended by Drawdown Agreements entered into after 17 November 2020 and for amounts which exceeded the original credit limit. Accordingly, this not a reasonable arguable defence to Flexigroup’s application.
Goods sold at an undervalue
[26] Some of the goods which were subject to the Master Facility Agreement were sold to the new tenant who took over THD’s premises for the sum of $20,000. Mr Goldenberg alleges they were sold at an undervalue and accordingly the amount claimed by Flexigroup in its application is over-stated. He alleges that the balance of
the dental equipment located at the premises not sold to the incoming tenant has not been accounted for by Flexigroup. He also alleges that Flexigroup’s calculations of the debt are not accurate and do not account for all payments made.
[27] In response to this, Mr McLean first of all points to the detailed evidence of the calculation of the debt owed under the Guarantee, as set out in the schedule annexed to Mr Ross’ affidavit.6 As to the sale of the equipment to the new tenant taking over THD’s premises, Mr McLean points to Mr Ross’ updating affidavit in reply, noting the following:7
(a)Once THD was placed into liquidation, Flexigroup decided the cost of taking possession and selling the equipment would outweigh the potential return;
(b)Flexigroup invited the liquidator to sell the equipment and account to Flexigroup for the net proceeds of sale. The liquidator declined this invitation;
(c)on 29 May 2024, Flexigroup’s solicitors received a notice from the landlord of THD’s premises, who advised that if the equipment was not removed from THD’s premises by 6 June 2024, the equipment would be deemed to be abandoned. Flexigroup therefore had a very short time in which to remove the equipment;
(d)if Flexigroup had to remove the equipment from the premises, Flexigroup would have incurred significant costs in de-installing the equipment from the premises and repair costs to reinstate the premises back to their original condition;
(e)Flexigroup did not currently know the status of the equipment and given the short time-frame imposed by the landlord of the premises to
6 Affidavit of Glen Martin Ross in support of the summary judgment application by the plaintiff, affirmed on 25 June 2024.
7 Affidavit of Glen Martin Ross affirmed on 18 October 2024.
remove the equipment opted to sell some of the equipment to the incoming tenant of THD’s premises for $20,000.
[28] Mr McLean was unable to present to the Court detail of estimated costs of removal of the equipment and making good the premises as required under THD’s lease. The Court is therefore not able to assess whether Flexigroup’s decision to sell some of the equipment to the incoming tenant of THD’s premises for $20,000 was reasonable in the circumstances. In addition, no evidence was presented to the Court as to the fate of the balance of the equipment not sold to the incoming tenant.
[29] I am of the view that there is insufficient evidence for the Court to reach a conclusion on whether Flexigroup has taken reasonable steps to mitigate its loss in dealing with the equipment having regard to disposal of the equipment by Flexigroup by part-sale to the incoming tenant of THD’s premises and the uncertain fate of the remainder of the equipment (possibly having been abandoned to the landlord of the premises). On the face of it, equipment which was purchased for approximately
$377,000.00, part of which was then sold for only $20,000 (although it is unclear how much of the equipment was sold), requires further explanation by Flexigroup.
Result
[30] As a result the conclusions I have reached at [22], [25] and [29], I am of the view that Flexigroup is entitled to judgment for liability against Mr Goldenberg under the Guarantee but the quantum of Flexigroup’s claim needs to be determined at a hearing. This is principally because the sale of part of the equipment and the circumstances of the sale (including evidence regarding the costs of de-installing the equipment and reinstating the premises) and the fate of the balance of the equipment, requires further investigation as to whether Flexigroup took reasonable steps to mitigate its loss having regard to the circumstances it was in.
Orders
[31]I make the following orders:
(a)Judgment is given against Mr Goldenberg for his liability to Flexigroup under the Guarantee;
(b)the quantum of Flexigroup’s claim is to be determined at trial and the parties are to revert to the Court for directions for the quantum hearing to be set down for trial;
(c)costs are reserved and will be dealt with at the hearing for quantum.
…………………………….. Associate Judge Taylor
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