FM Custodians Limited v Hopkins HC Christchurch CIV-2011-409-002119

[2011] NZHC 1689

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-002119

BETWEEN  FM CUSTODIANS LIMITED Plaintiff

AND  TIMOTHY JAMES HOPKINS First Defendant

AND  DAVID ANTHONY WILSON Second Defendant

Hearing:         15 November 2011

Appearances: S Caradus for Plaintiff

M J Wallace for First Defendant
No appearance for Second Defendant

Judgment:      21 November 2011

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to leave to amend statement of claim in summary judgment proceeding

and to rely on additional evidence

[1]      This  proceeding  had  its  first  call  in  relation  to  the  plaintiff’s  summary

judgment application against both defendants.

[2]      I reserved my decision on an issue raised by the defendants.  The issue is as to whether the plaintiff should be permitted to amend its statement of claim for the purposes of the summary judgment application.

[3]      The plaintiff filed what Mr Wallace has correctly described as a relatively

“short form” statement of claim.  It is in four paragraphs.  It reads:

The Plaintiff says:

1.        It is a duly incorporated  company having its registered  office at

Level 5, 10 Customhouse Quay, Wellington.

FM CUSTODIANS LIMITED V TIMOTHY JAMES HOPKINS HC CHCH CIV-2011-409-002119 21

November 2011

2.        Pursuant to a Loan Agreement dated the 28th  day of August 2009 (“the Loan Agreement”) Arnold Valley Investments Limited (“the Company”) accepted a loan of $5,000,000.00 from the Plaintiff on the terms and conditions more particularly set out in the Loan Agreement, but including inter alia, the following terms and conditions:

(a)       Term:

1 year from date of advance subject to prior demand. (b)   Interest rate:

Initially 10.0% per annum. (c)     Penalty interest rate:

5.00% per annum above the ordinary interest rate.

3.        The obligations of the Company are guaranteed by the First and Second Defendants under the Loan Agreement and pursuant to a Deed of Guarantee and Indemnity dated the 22nd of December 2003.

4.        The  First  and  Second  Defendants  defaulted  pursuant  to  written Demands dated the 1st of September 2011 to meet the obligations of the Company to the Plaintiff.

[4]      The supporting affidavit of Graeme Reid was (apart from its exhibits) not much longer.  Mr Reid deposed to the correctness of the allegations in the statement of claim, annexed the contractual documents, referred to demands which had been made to the defendants for payment which had not been responded to, and deposed that he and the plaintiff do not believe that the defendants have a defence to the claim.

[5]      Both  defendants  filed  notices  of  opposition.    A  number  of  grounds  of opposition were advanced.  The second defendant noted in particular that there had been no advance by the plaintiff to the borrower recorded in the loan agreement dated 28 August 2009.   The first defendant noted the failure of the statement of claim to allege defaults under the loan contract or to provide details of the arrears. Other detailed grounds of opposition were also pleaded.

[6]      The plaintiff sought to meet these issues through a memorandum by which it was stated:

The Plaintiff seeks leave to answer particulars of the debt by way of an Amended Statement of Claim.  Counsel referred to the decision of the Court of Appeal in Cegami Investments Ltd v AMP Finance Corporation (NZ) Ltd [1990] 2 NZLR 308 in support of the application for leave.

[7]      With the memorandum the plaintiff filed a “reply” affidavit from Mr Reid who explained that he (having searched through the plaintiff’s files) could confirm that there had originally been a loan of $5m made in 2004 which was “subsequently rolled over” by the 28 August 2009 loan agreement.  Mr Reid then deposed to the sums owing by way of principal and interest.  He exhibited an “amended statement of claim” and a copy of the borrower’s loan account.

[8]      In an expanded paragraph 4 of the statement of claim, particulars of the debt and default were identified by reference to principal and interest.  In an amendment to  paragraph  2  of  the  statement  of  claim  the  words  “accepted  a  loan  of

$5,000,000.00” were altered to read “extended its loan of $5,000,000.00”.

[9]      In other words, as the memorandum of counsel for the plaintiff had indicated, the amended statement of claim provided further particulars of the debt.  But it also in paragraph 2 changed the allegation from “acceptance” of a loan to “extension” of a loan.

[10]     Mr  Wallace  submitted  that  leave  ought  not  to  be  granted  to  amend  the statement of claim.   He referred to the judgment of this Court in  Westpac New Zealand Ltd v Cooper[1].  He referred particularly to the judgment of Duffy J at [8] in which her Honour said:

A statement of claim which fails to include material allegations, and primary affidavits   which   fail   to   adduce   evidence   relevant   to   proving   those allegations, can also result in the application for summary judgment being dismissed.   Minor errors or omissions may be curable by permitting the applicant leave to amend its pleading and file additional affidavit evidence.

[1] Westpac New Zealand Ltd v Cooper HC Auckland CIV-2009-404-000990, 29 January 2010.

[11]     I find equally important in the present context the concluding sentence of that paragraph, namely:

But where such errors and omissions create real prejudice for a defendant, the likely result will be refusal of summary judgment.

[12]     Mr Wallace referred also to her Honour’s adoption of observations made by the Court of Appeal as to the importance of pleadings in Price Waterhouse v Fortex Group Ltd[2].  At [32] her Honour observed:

The statement of claim in a summary judgment application should provide the Court and the defendant with a road map which sets out the essential elements of the plaintiff ’s claim.  Neither the Court nor the defendant should be placed in a position of having to make sense of the plaintiff ’s claim by reference to the plaintiff ’s affidavit evidence, particularly evidence that has been filed by way of reply.

[2] Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at [13].

[13]     Finally, Mr Wallace noted that the facts in Cegami Investments Ltd v AMP Financial  Corporation  (NZ)  Ltd[3](relied upon  by Mr  Caradus)  are  significantly different to those in the present case.   The proceeding in Cegami Investments had taken an unusual course because the contract in issue had been repudiated between the filing of the summary judgment application and the hearing.

Discussion

[3] Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd (1990) 2 PRNZ 271.

[14]     The facts in Cegami Investments are significantly different to those in this case.  Nevertheless, the overarching principles discussed by the Court of Appeal in Cegami  Investments  are relevant. In particular, in the judgment of the Court delivered by Casey J at [276], it was recognised that:

… we see no good reason why the ordinary provisions about amendment should not apply to such proceedings if the justice of the case requires it and there is no prejudice to the defendant.  It would be a matter for regret if these salutary rules became hedged with restrictive interpretations narrowing the ordinary scope of amendment, regardless of the merits of the application and the position of the parties.

[15]     In the present case the plaintiff made written demands of the defendants for the sums now claimed.  The plaintiff’s evidence in support of its summary judgment application establishes that the demands were served on 1 September 2011 and did not elicit from the defendants any denial of liability or any reason for failure to make repayment of the loans.  At the time the proceeding was filed some six weeks later, the plaintiff therefore had no particular reason to apprehend any challenge to the

quantum of its claim or the basis of its claim.  That said, a plaintiff seeking summary

judgment  in  relation  to  any  contractual  claim  ought  to  provide  an  adequate breakdown as to the make-up of the total claim and affidavit evidence of the sum or sums involved.  Mr Reid’s second affidavit provides an example of the accounting evidence which could and properly should have been included in his first affidavit.

[16]     The  criticism  in  relation  to  the  original  drafting  of  paragraph  2  of  the statement of claim I find to turn on a relatively semantic point.  There is room for argument as to whether the documenting of the rollover of a loan does or does not involve the “acceptance” of that loan.  As it is, the plaintiff saw fit to seek to meet the defendant’s objection by the proposed amendment to the word “extended”.

[17]     Importantly in relation to both issues, no submission was made to the Court as to prejudice from the proposed amendments.  Equally, and having regard to the defendants’ failures to take any issue with demands which were properly issued six weeks  before  the  proceeding  was  issued,  I  do  not  regard  any  shortcomings  of pleading on the part of the plaintiff as egregious.

[18]     The application for leave to amend was promptly filed by the plaintiff before the first call of the summary judgment application.  Having regard to the filing of the defendants’ notices of opposition, the plaintiff’s application could not have been heard by the Court on its first call.

[19]     If there is any potential detriment to the defendants, it must lie only in the possibility that they have a need to file a further affidavit or affidavits having read the  “reply”  affidavit  of  Mr  Reid.    Any  loss  in  that  regard  can  be  dealt  with adequately by an additional award of costs to the defendants if they are successful or by some reduction of the plaintiff’s costs if it is successful.

Order

[20]     I grant leave to the plaintiff to file and serve an amended statement of claim and to have the affidavit of Graeme Reid in reply read as part of the summary judgment proceeding.  The costs associated with the leave application are reserved on the basis referred to above.

Timetable

[21]     I direct:

[i]       The plaintiff is to file and serve its amended statement of claim within five working days.

[ii]      The defendants are to file and serve any amended notices of opposition and any additional evidence within five working days after service of the amended statement of claim.

[22]     I adjourn the proceeding to a hearing in April on a date to be allocated by the

Registrar (one day reserved).

[23]     The applicant/plaintiff shall file and serve not later than ten working days before the hearing:

(a)       Applicant’s submissions (Court’s copy to be in duplicate). (b)          A chronology (Court’s copy to be filed in duplicate).

(c)       A bundle of the relevant Court documents, including affidavits which are indexed and which have each page numbered.

(d)      The applicant’s submissions must contain:

i.        Reference  to  any  specific  passage  in  the  evidence  the applicant will refer to at the hearing; and

ii.       A list of the names and correct citations of any authorities mentioned.

[24]     The respondents/defendants shall file and serve not later than three working days before the hearing:

(a)      Submissions that meet the requirements of the applicant’s submissions (Court’s copy to be in duplicate); and

(b)If the respondents disagree with the applicant’s chronology, a separate chronology noting areas of disagreement (Court’s copy to be filed in duplicate).

[25]     The  applicant/plaintiff  shall  prepare  and  produce  at  the  hearing  of  the application a bundle of all the authorities referred to in the submissions (excluding including   any   authorities   referred   to   for   straightforward   and   uncontentious

propositions).

Associate Judge Osborne

Solicitors:

Rhodes & Co, PO Box 13 444, Christchurch
Lane Neave, PO Box 13149, Christchurch