Frickleton v Stag Trading Limited
[2015] NZHC 2534
•14 October 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-710 [2015] NZHC 2534
BETWEEN CARL WILLIAM FRICKLETON
Plaintiff
AND
STAG TRADING LIMITED First Defendant
MARK ANDREW FRICKLETON Second Defendant
Hearing: 14 October 2015 Counsel:
J Grace for the Plaintiff
M Freeman for the DefendantsJudgment:
14 October 2015
ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] On 1 May 2014 I delivered a reserved judgment in which I dismissed an application by the plaintiff for summary judgment against the first defendant on a claim for a loan allegedly owed by the first defendant to the plaintiff. The reason for the dismissal of the summary judgment application was that the plaintiff had failed to show that the first defendant had no defence on the questions of (1) limitation and (2) liability for interest on the claimed loan.
[2] In the course of delivering the summary judgment, I dealt with an argument by the first defendant that there was in fact no loan made by the late Mr Frickleton to the first defendant. I found on that issue that the first defendant had not raised an arguable case that no loan had been made by Mr Frickleton to the first defendant, and that the first defendant had not raised any real question for trial on the issue of
whether the loan had been made.
CARL WILLIAM FRICKLETON v STAG TRADING LIMITED [2015] NZHC 2534 [14 October 2015]
[3] In the result, the first defendant succeeded in having the summary judgment application dismissed. The defendants have since included in their pleadings a contention that there was no loan. The plaintiff did not apply to strike those pleadings out.
[4] The defendants now apply to the Court under r 7.51 for an order rescinding that part of the summary judgment in which I found that the first defendant had failed to raise a serious issue on the existence of the debt which was claimed from the first defendant.
[5] The passage from the summary judgment which is the subject of the defendant’s application under r 7.51 reads:
[34] I am satisfied that the defendant has not raised an arguable case that no loan was made by Mr Frickleton to the defendant.
[35] There are, of course, evidentiary issues for the plaintiff, in that the loan agreement relied upon is said to have been made orally, and the party who entered into the agreement with Mark on behalf of the defendant is deceased and unable to give evidence. To meet that difficulty, the plaintiff relies on the evidence of Mr Chard, who deposes that he was privy to the relevant discussions. The plaintiff also relies on affidavits filed in the Family Court proceeding where, in an affidavit setting out details of his assets and liabilities, Mr Frickleton included as an asset the debt due to him from the defendant, and a letter from Mark dated 31 March 2004 in which he advised Mr Frickleton of his intention to “buy out” Mr Frickleton's share of High Street Cars. The plaintiff also relies on the fact that the claimed debt, with interest thereon, was included in the defendant's financial statements as a debt due to the late Mr Frickleton, in each of the years ended March 2005, March 2006 and March 2007.
[36] Although Mr Frickleton appears not to have participated to any great degree in the running of the car sales business in the period from 1999 through to 31 March 2004, he appears to have participated equally with Mark in the profits of the business for each of the years ended March 2002, March 2003 and March 2004, and it was Mr Frickleton who retained the licence for the car sales business. In an affidavit sworn in the constructive trust proceeding on 31 May 2012, Mark acknowledged that, in the period between 2000 and 2004, he and his father were still partners “on paper”. His evidence was that by about 2000, his father had pretty much lost interest in the business, and although he still completed the occasional deal, he preferred to “potter around”.
[37] Even if that were so, I do not see it as a basis for concluding that, by
31 March 2004, Mr Frickleton no longer had any interest in the business. The situation appears to me to be a common one, where a father who has
been joined in business by his son tends to wind down his involvement in his
latter years. It does not mean that the business is somehow automatically
transferred to the son, particularly in circumstances such as this where profits appear to have been shared roughly equally right through until 31
March 2004.
[38] Indeed, Mr Dewar did not suggest at the hearing that Mr Frickleton had no interest in the business as at 31 March 2004. Mark acknowledged in his counsel's submissions that Mr Frickleton had a “residual interest” in the business, but not to the extent of the amount of the loan now claimed by the plaintiff. Mr Dewar submitted that Mr Frickleton's interest in the business at
31 March 2004 was “unquantified”.
[39] There is no suggestion that Mr Frickleton gifted his interest in the business to the defendant on 31 March 2004, nor any suggestion that the defendant did not take over outright ownership of the business on that date. In those circumstances, the only sensible conclusion is that Mr Frickleton did leave the amount of his interest in the business, and effectively thereby lent the defendant a sum equivalent to the amount of that interest.
[40] Both parties subsequently acted on the basis that there was a loan of
$213,932.90 from Mr Frickleton to the defendant. Mr Frickleton included the loan as an asset in his affidavit of assets and liabilities subsequently filed in the Family Court, in circumstances where it can be safely assumed that he would not have included the loan if he did not regard it as an asset, which would or might be subject to the claimant's relationship property claims. The defendant also adopted the figure of $213,932.90 for a period of three years in the defendant's financial statements for the years ended 31 March 2005 to
31 March 2007.
[41] It is in my view not plausible that Mark did not notice the loan recorded in the defendant's financial statements. The loan was set out separately and not included as a component part of a total figure incorporating other loans. In my view Mark could not have missed it. Nor do I consider it plausible that Mark, as the owner and director of the business, would not have been keenly interested in the loan figures in his company's accounts, particularly having regard to the apparently strained relationship between Mark and his father over the latter part of their involvement together in High Street Cars.
[42] As noted by the Privy Council in Eng Mee Yong, I am not bound to accept uncritically as raising a dispute of fact which calls for further investigation, every statement in an affidavit which is lacking in precision, inconsistent with undisputed contemporary documents, or which is inherently improbable. In my view, the defendant's contention that there was no loan at all, or that it was “unquantified”, falls within that category.
[43] Accordingly, I find that the defendant has not raised any real question for trial on the issue of whether or not Mr Frickleton lent the defendant $213,932.90 on 31 March 2004.
[6] The defendants’ concern is that that passage in the summary judgment will or may prevent them from running the defence that there was in fact no contract between the late Mr Frickleton and the first defendant.
[7] The application under r 7.51, then, proceeds on the basis that the passage in the judgment quoted above created an issue estoppel against the defendants on the question of whether there was or was not a loan from the plaintiff to the first defendant or the second defendant as pleaded.
[8] The defendants argue that the plaintiff failed at summary judgment stage to put material before the Court which he had available to him, which should have been disclosed to the Court. They wish to have the relevant part of the summary judgment rescinded, so that what they say was a misleading position put to the Court can be corrected.
[9] The plaintiff rejects the contention that he misled the Court in any way, and he has opposed the rescission application.
[10] In the view to which I have come, it is not necessary to decide whether or not there was any conduct at summary judgment stage which might justify a rescission order under r 7.51. At this morning’s hearing, I drew to the attention of Mr Grace two decisions of the Court of Appeal on issue estoppel, namely Talyancich v Index
Developments Ltd1 and Contact Energy Ltd v Attorney-General.2 I stood the matter
down to enable Mr Grace to consider those two cases, the effect of which I understood to be that an issue estoppel can only be founded on determinations which are fundamental to the decision, and without which the decision cannot stand. Other determinations cannot support an issue estoppel however definite the language in which they are expressed.
[11] When the hearing resumed Mr Grace advised that he accepts that there can be no issue estoppel in this case, and that there is, in effect, no need for any part of the summary judgment orders to be rescinded.
[12] I think that must be correct. The summary judgment was determined against the plaintiff on the grounds that the first defendant had an arguable case on the
limitation and liability for interest points. The statements made, on the limited
1 Talyancich v Index Developments Ltd [1992] 3 NZLR 28.
2 Contact Energy Ltd v Attorney-General [2009] NZCA 351.
evidence available at summary judgment stage, on the question of whether or not there was or was not a contract between the late Mr Frickleton and the first defendant, were certainly not fundamental to the decision made, which was to dismiss the summary judgment application.
[13] I note further that, if there had been an issue estoppel on the question of contract or no contract, the result of the summary judgment application (success for the first defendant) would have precluded any appeal on the issue of the existence of the contract.
[14] The plaintiff, then, accepts that the summary judgment did not create any issue estoppel of the kind with which the defendants have been concerned. In those circumstances, I conclude that there is no need for, and no basis for, an order under r 7.51 rescinding the summary judgment. I accordingly dismiss the defendants’ application under r 7.51.
[15] That decision clears the way for the defendants to plead such defences as they may consider are appropriate. The remaining concerns appear to be allegations of failure to disclose material at summary judgment stage, and in particular how those allegations may or may not reflect on the plaintiff and his advisors.
[16] I do not think the existence of those concerns provides a reason for the Court to now embark on a determination of whether or not the Court was in fact misled at summary judgment stage by a failure to disclose information. The fact of the matter is that any failure to disclose has not in the event caused any injustice to the defendants – the decision was, after all, to dismiss the summary judgment application.
[17] The parties’ concerns over whether or not there was appropriate disclosure at summary judgment stage may, however, possibly be relevant on the question of costs.
[18] On the question of costs, I have found that the r 7.51 application by the defendants was unnecessary, and it has been dismissed accordingly. However the
plaintiff pursued to the eleventh hour an argument that the summary judgment did create an issue estoppel. In those circumstances, I consider that the appropriate course is to reserve costs, and there will be an order accordingly.
Associate Judge Smith