King v Woods

[2013] NZHC 3467

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3532 [2013] NZHC 3467

BETWEEN  ROBERT ALBERT DUNCAN KING First Plaintiff

INTERNATIONAL SERVICES AND SYSTEMS LIMITED

Second Plaintiff

ANDMARK WOODS Defendant

Hearing:                   18 November 2013

Appearances:           Mr B Stewart and Ms S O'Grady for first and second plaintiffs

Mr S Connolly for defendant

Judgment:                19 December 2013

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

19.12.13 at 11 a.m., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

KING & ANOR v WOODS [2013] NZHC 3467 [19 December 2013]

[1]      The defendant’s association with the plaintiffs apparently began when he joined a company which had been started by the first plaintiff, United Cleaning Ltd (UCL) of which he was at some stage appointed general manager.   He joined the company on 21 June 2001.  His employment ended in 2012.  Litigation has ensued between the parties over a number of matters including the employment contract.

[2]      A number of loan transactions were entered into between the parties.   In order to  be clear about  the issues in the case it  is  necessary to  say something additional about the factual background.

[3]      The defendant was employed by UCL as I have already noted.  That business had been commenced by Mr King, the first plaintiff.  At some point the shares in the company came to be owned by the second plaintiff.  Later, the second plaintiff, (no doubt at the behest of Mr King) and the defendant entered into agreements for the sale of shares in the company in or about 2008.   Mr Peter King.entered into agreements for the defendant and Mr King’s son to purchase shares in UCL from the second plaintiff.

[4]      Finally  the  dealings  between  the  parties  included  a  number  of  advances which were made to the defendant by the first and second plaintiff.   It is those advances which are the basis of the claims which the plaintiffs have brought in their current summary judgment application.  The loans upon which the plaintiffs now sue were the subject of home-made acknowledgements of debt.  They will be described in detail further below in this judgment.

[5]      Originally the plaintiffs claim extended to some 13 different transactions but at the hearing on 18 November Mr Stewart for the plaintiffs advised that the claim for summary judgment would now be limited to some five claims.

[6]      Broadly speaking there are three defences advanced:

a)        the defendant did not receive the money that was said to have been advanced to him;

b)the obligation to repay was conditional upon a future event occurring which was either a sale of shares in UCL or a sale of the company’s business;

c)       the advances were caught by the provisions of the Credit Contracts and Consumer Finance Act (“the Act”), to which more detailed reference is made below.  Because the creditors failed to comply with the legislation, they cannot now take steps to recover.

Repayment on sale of the company’s business

[7]      As I have mentioned one of the grounds of opposition to summary judgment which the defendant has put forward is that the repayment of any loans was linked to an eventual sale of the company’s business or the shares in the company at which point the loans would have to be repaid but there had been no responsibility to make the repayment prior to that event occurring.  This defence was put forward in relation to loan six, 10, 12 and 13.

[8]      The defence was not stated with any clarity but in one of the affidavits which the defendant filed he said the first plaintiff told him:

not to worry about the debt, that as long as [the defendant] continued to run the company at a good profit, the debt both business and personal, could be sorted in the wash up upon the sale of the business”.

[9]      He also said:

19.      I consistently questioned Mr Robert King regarding my ability to repay anything if it was required and was told in response including the period prior to me buying shares in the company that it would all be sorted out on the sale of the company.   The lack of formality has caused major problems following the breakdown in the relationship and my being fired as General Manager of United Cleaning Services Limited.

[10]     He also deposed:

49.      Again, this loan was treated similarly by the First Plaintiff as with all the other loans.  Interest was never charged or demanded.  Any discussions with Mr Robert King were always as previously stated that the repayment would be when the shares, not yet issued to me, were sold (that is to say when they were sold to another party)

[11]     The extracts from the affidavit apparently assert a statement to the effect that the defendant and/or his trust would acquire the shares but not pay the price agreed for them until a further sale of the business - presumably to a third party, took place. The  comments  that  I  make  are  necessarily tentative  because  of  the  absence  of detailed explanation as to how the arrangements were supposed to work.

[12]     As this is a common strand in the defence which the defendant has filed in opposition to the claims based upon alleged loans, it can be dealt with without reference to any particular loan.  It is pleaded as a generalised ground of opposition by the defendant.

[13]     The defendant’s counsel did not provide any analysis of the exact legal effect of the alleged arrangements which were claimed by the defendant.  In order for the issue to amount to an arguable defence, at least some consideration needs to be given to whether the grounds for opposing repayment on the grounds that such was linked to the share sale are valid.  That in turn requires at least some consideration to be given to the effect that the defendant says that the sale of the shares arrangements had on the obligation to repay the loans.

[14]     There are also some gaps in the evidence which mean that the Court is left in the position where there is some doubt about whether the sale of the shares will be proceeding.

[15]      The plaintiffs’ position is that the alleged arrangements in respect of the loans were not sufficiently credible to even give rise to an arguable defence.   Mr Stewart  said  that  the  arrangements  when  analysed  could  have  resulted  in  the defendant never having to pay for the shares.   He referred to the fact, which was common ground, that the defendant acquired 48% of the shares in the company. Even though he has been removed as an employee of the company, he remains a shareholder.  Mr Stewart said that before a sale of the business of the company could ever be carried out, there would need to be a 75% majority of shareholders in favour of  that  course  being  taken  because  the  transaction  would  represent  a  major

transaction.   Where shareholders exercise a power to approve a major transaction, that power must be exercised by special resolution requiring a 75% majority.1   ...

[16]     Likewise, Mr Stewart submitted, if the repayment event was a sale of the shares, the defendant would always have been in a position to defeat that event by declining to agree to all the shares in the company, or his own parcel of shares, being sold off.   Quite apart from questions of a lack of contractual certainty about the position, Mr Stewart said that it defied belief that these two businessmen would have entered into an arrangement of this kind.

[17]     There are thus two issues which arise with regard to the condition which the defendant says the parties intended to attach to his obligations to repay.  The first is a factual question and goes to the matter of the existence of an arguable defence. Whatever the legal effect may be of the type of rider that the defendant contends for, there must at least be some arguable basis on the evidence to suggest that Mr King may have said what the defendant alleges.

[18]     Essentially what  Mr Woods  was  contending for was  an  express  term  of contract to the effect that the loans would continue to run on until such time as either the business of the company was sold or the shares in the company were disposed of. If it was reasonably arguable that Mr King did in fact say what is attributed to him, then it there would also be reasonably arguable that the acceptance by the defendant of an advance on those terms amounted to an express contract governing the repayment of the loan in the way indicated.  The real issue though is the factual one of whether it is likely that Mr King actually would have put forward the type of scheme that he allegedly did.

[19]     The case for the defendant is that in the circumstances under discussion, Mr King was conveying to Mr Woods that while he was advancing money (or the second plaintiff was) there would be no need for the defendant to repay it until one of the events referred to had occurred.  I come to the conclusion that this is not the basis for an arguable defence for the following reasons.  First, the amounts that were involved in the various loans, and not limiting them to the five loans which are now

the subject of the summary judgment application, was some $150,300 even without the inclusion of interest.   To suggest that it was Mr King’s intention that such a substantial sum would not have to be repaid for an indefinite period that might extend years or even a decade or more into the future or on terms that it may never have to be paid back at all seems unlikely.   It did not make commercial sense. Secondly, there is no support in the contemporaneous documents which the parties signed for the argument that Mr Woods now puts forward.   By signing those documents he acknowledged the debt that was not in any way conditional upon the future contingency.  If his version of events is correct, Mr King wrote out only part of the arrangement and left off a critical aspect, which is when the obligation to repay would accrue.

[20]     Assuming that the defendant’s evidence is to be accepted that there was an agreed arrangement of the kind which he contends for, the Court has to consider in a broad way whether if those facts were proved, there are arguable grounds for considering that the plaintiffs’ claim will be defeated.

[21]     It would seem unlikely as a matter of contractual intention that the parties were agreeing to an outcome whereby if the business was never sold, the obligation to repay the loans would never accrue.   But other difficult questions would raise themselves  for  consideration  including  the  question  of  whether  any sale  of  the business had to be within a measurable timeframe from the date when the loans were made or whether any hiatus in the terms of the contract was to be supplied by importing a term of reasonableness.  As well, the Court may well take the view that an implied term would be imported into the contract between the company and Mr Woods to the effect that if he left the company and by the date of his departure the business had not been sold, the loans would become payable either immediately or

within a reasonable time.2

[22]     On such an approach, the fact that Mr Woods left the company before the business  was  sold  and  the  fact  that  the  last  loan  was  made  in  2009  are  both persuasive of the view that on a yardstick of reasonableness, the loans must by now be due for repayment.

No time fixed for repayment

[23]     Mr Stewart’s submission was that the advances were repayable on demand, whether that was an express term of the contract or otherwise.  He referred to the case of Gould v McNeill where Heron J when considering advances in the circumstances of that case said:3

The critical question is  whether this  advance  was  repayable on  demand meaning no more than it was immediately repayable once it had been advanced in the absence of any other provision, or whether the parties contemplated by agreement, a form of demand, or in other respects the loan would not be recoverable unless demand was made.  See DFC New Zealand Ltd v McKenzie, Murphy v Lawrence. It is well settled that loans simpliciter are regarded as on demand and time runs from that date of advance. Something else in the contractual arrangements is required to defer the cause of action beyond the date of advance.  Here an implied term is pleaded that should the parties separate the defendant will repay the balance of the loan.

[24]     The Judge then referred to the well-known test in BP Refinery (Westernport) Pty v Shire of Hastings concerning the criteria that have to be satisfied before the court will imply a term into a contract.4

[25]     Earlier authority is to the effect that where there is an acknowledgement that an amount has been received in circumstances where there is no suggestion that the presumption of advancement applies, then the money is assumed to be repayable on demand.  The authority for that proposition is the case of Seldon v Davidson:5

Accordingly, one is really driven back to consider this matter without the assistance of authority and, being so unassisted, I ask myself what is to be inferred as to the nature of the transaction when the simple payment of money is proved for admitted between strangers.  I entirely agree with my Lord that, on that bald state of affairs, proof of payment imports a prima facie obligation to repay the advancement in the absence of circumstances from which presumption of advancement can or may arise.

My  Lord  has  expressed  the  view  that  the  loan  would  be  repayable  on demand.  I would say, if not repayable on demand, at least repayable within a reasonable time of the request for payment, and of course, if it be the case that mere loans were made and, later on, the borrower repudiates the loans and is asserts that the advancements were by way of out-and-out gifts, that

3 Gould v McNeill HC Napier CP9/99, 12 February 2001 at [28], affirmed on appeal: McNeill v Gould

(2002) 4 NZ ConvC 193,557 (CA).

4 BP Refinery, above n 2.

5 Seldon v Davidson [1968] 1 WLR 1083 (CA) at 1089.

repudiation of the true nature of the transaction would upon any view render the loans immediately repayable.

[26]      It follows that the loans were repayable on demand.

It was not the party’s intention that the loans and interest would be payable

[27]     A further defence that was put forward by the defendant was by way of a denial taking the form, for example with regard to the sixth the loan, that:

The defendant denies the amount is repayable.

[28]     It has to be said that a pleading in that form is unacceptable.  If it does no more than attempt to put the plaintiff to proof, it cannot avail a defendant in the face of the fact that the plaintiff has sworn an affidavit verifying the statement of claim.

[29]     However, giving the defendant benefit of the doubt, it would appear that the substance of the underlying defence was that while the money was advanced, it was not seriously expected that Mr Woods would have to repay it.  The explanation for this was said to lie in the fact that, as Mr Connolly put it in his submissions, there was a close relationship between the first plaintiff and the defendant which was akin to a family type of tie.   Mr Connolly submitted to me that the assistance for his client’s view of the defence was to be found from the fact that years went by without any request for payment of interest or principal.  This, he submitted, was consistent with an understanding on the part of the parties that the debt would never have to be repaid.

[30]     So far as interest is concerned, there are two possibilities.  The first being that the failure to render statements requiring the payment of interest amounted to an abandonment or waiver of the obligation on the part of the defendant to pay interest. The other is that interest was to continue accruing but not be payable until demand was made.

[31]     Given that the parties in this case signed an acknowledgement of debt which on its face bore all the hallmarks of an enforceable obligation, the contention which is advanced by the defendant is inconsistent with what the parties stated in their

contemporaneous document.   As has been mentioned in many cases, the Court is entitled to disregard evidence of this kind: Eng Mee Yong.6

[32]     The loan as evidenced by the memorandum that the parties signed provides any explanation that might be needed for the fact that a considerable number of years have gone by since the plaintiffs first became entitled to claim for interest.   That explanation lies in the fact that it was the prerogative of the plaintiffs to defer making demand for payment of the money so long as they chose.

[33]     Nor can it be suggested that passage of time on its own can give rise to a defence.  In my view the argument that is put forward by Mr Woods in relation to this part of the claim overlooks the fact that the enforcement of legal obligations of this kind at the general law is subject to the provisions of the Limitation Act.  Unless the right to claim interest and principal was barred by the statute of limitations than any delay in claiming it was irrelevant.  There is no laches-type of defence available. Delay can in some circumstances give rise to an implication of abandonment or waiver but  in  the circumstances  of this  case,  none was  suggested.    In fact  the continuing status of Mr Woods as the general manager of UCL may have persuaded the plaintiffs that in the interests of retaining his goodwill, it would be preferable to allow the period of credit to continue running on without making demand.  Another possible explanation is that so far as the plaintiffs understood, they were earning a good rate of return on the money that they had advanced to the defendant and were content to let matters run on.  It may in fact have been a combination of these two elements that explains why no demand was made until it was.  Certainly, there is a close link between the falling out with Mr Woods as the company manager, his loss of that position and the calling up of the loans.   In essence, there is nothing particularly out of the way or remarkable about the fact that demand was not made until it was and therefore the case does not call for an explanation of waiver etc.

[34]     For the foregoing reasons I conclude that there is no defence which ought to be sent to trial concerning the liability of the defendant for the loans based upon the supposition that it was never really intended that the money be repaid.

6th Cause of action

[35]     I now turn to the first of the specific loans in regard to which the plaintiff seeks summary judgment.

[36]     The sixth alleged loan agreement was for the sum of $36,300 and is said to have been advanced from Robert King to Mark Woods and Peter King as trustees of the Arkles Trust on 17 June 2008.  The sixth loan agreement provided that interest was payable at the rate of 9.5% per annum.

[37]     On 17 June 2008 the parties signed a document evidencing a transaction in the following terms:

R.A.  King agrees to advance the  sum of  $36,300 to Arkles Trust,  with interest to be calculated at 9.5%.

[38]     Although he did not set out in his notice of opposition such a defence, in his affidavit the defendant took the point that this loan was not made to him personally but to the trust.  That cannot avail him because the fact that the loan was made to him as a trustee does not displace his personal liability: Meurant.7

[39]     He then says:

51.      The  loan  was  treated  similarly  to  all  of  the  other  loans  and  no schedules of interest or principal to be repaid were ever advanced.   Any discussions about loans in general as stated was that if they were to be repaid, would be repaid on the sale of the shares in the company which I was to acquire.

[40]     I have already dealt with this ground of defence separately  above and  I concluded there that it was most unlikely that as a matter of commercial reality the parties would have intended that such a provision governed the loan advance.  It is not mentioned in the document which the parties entered into at the time when the loan advance was agreed to.  I do not consider that the defendant has a reasonably arguable defence on that ground.  There are no other bases upon which the defendant is able to defend the claim.

The 10th loan

[41]     The  plaintiff  alleges  that  the  tenth  loan  agreement  was  for  the  sum  of

$17,000, and was advanced from the second plaintiff (ISSL) to Mark Woods on 9

April 2008.  The tenth loan agreement provided that interest was payable at the rate of 9.5% per annum.

[42]     In his notice of opposition the defendant says:

.. that the amount claimed was payment of a bonus and that if the court finds that the amount is in fact a loan or is not repayable until the sale of the shares in the company owned by the defendant was made.

In his affidavit at paragraph 65 of his affidavit, Mr Woods alleges that:

The   payment to me of $17,000 was paid to me personally by way of a bonus.  It was not a loan despite the fact that a loan agreement is exhibited... If in fact it was determined to be a loan then it would have been dealt with in the same way as the other loans I have referred to earlier in respect of the sale of shares if and when that occurred.

[43]     The following remarks can be made about Mr Woods’ deposition.

[44]     It expresses a conclusion rather than the premises which would justify that conclusion being reached.  By that I mean it does not set out the primary evidence in terms of actual words used from which the understanding that he had is based.  Nor are any particulars given as to who the discussion was with, on what date it took place etc.  All he says is that “it would have been dealt with in the same way as the other loans”.  At best this sets out what Mr Woods’ subjective expectation was and is no basis for establishing a defence to the effect that the parties’ words and actions objectively construed had the meaning that he contends for.

[45]     There are other shortcomings about Mr Woods’ explanation about the bonus. It is common ground that Mr Woods was employed not by either of the plaintiffs but by UCL.  It is that company which would have had any obligation to make a bonus payment to him rather than either of the plaintiffs.  It would have been the company which would have been able to claim as a tax deductible cost the amount of any bonus.    Furthermore,  because  the  payment  would  attract  PAYE,  moving  that

obligation from the employee to one of the plaintiffs would have caused complications  without  any apparent  advantage  accruing  either  to  the  employing company, the plaintiffs or Mr Woods.

[46]     Critically, the structure of the agreement is quite different from that set out in the document which Mr Woods signed on 9 April 2008.  In such circumstances the oft-quoted remarks of the Privy Council in the decision of Lord Diplock in Eng Mee Yong are pertinent: 8

Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.

[47]     For the reasons that I have set out above, and having regard to the verification on oath that the advance was a loan, my conclusion is that Mr Woods does not have

a reasonably arguable defence to the contrary.

11th loan

[48]     The  11th   loan  was  for  $20,000  and  was  advanced  pursuant  to  an  oral agreement according to the plaintiff.  It is pleaded that the advance was subject to an implied term that it would be repayable on demand.   No agreement was reached concerning interest and the plaintiff seeks an award of interest pursuant to the Judicature Act.

[49]     The notice of opposition states:

The defendant says the amount claimed of the sum of $20,000 was not received or paid.

Non recollection of advances being made

[50]     In  his  affidavit  the  defendant  says  that  he  does  not  recall  receiving  the advance which is the subject of causes of action 11:

I have searched my personal bank statements for the relevant period and can find no payment of $20,000.

[51]     Because he makes the same comment about loans 12, and 13 I will make some observations concerning those loans as well as loan 11 at this point in the judgment.

[52]     In relation to the thirteenth cause of action he said that he that recalled the loan agreement in the sum of $30,000.  He went on to say:

78.      It is my recall that this loan of $30,000 was in fact advanced to me.

79.I  cannot  however  find  it  being  deposited  in  my  personal  bank account.

[53]     In response to these assertions the plaintiffs made enquiries with its bank and arranged for the relevant cheques, numbers 1972, 1977 and 1986 to be traced.   In every case the enquiries revealed that the cheques were paid into accounts of the defendant and S J Woods, his former domestic partner.

[54]     On behalf of the defendant, Mr Connolly complained that the evidence about the presentation of these cheques and the payment of the proceeds into the accounts having been provided in an affidavit in reply, the defendant was in a position where he could not comment or adduce further evidence on the point.

[55]     However, in my judgment there is nothing to this complaint.  First, there was no requirement that the plaintiffs provide information of this kind in the affidavit that they filed in support of the application for summary judgment.   The position is explained clearly in the case of Australian Guarantee Corporation (NZ) Limited v

McBeth.9

[56]     It was never going to be enough for the defendant to say that he had no recall of receiving the loans which was his response to loans 11, 12 and 13.  A failure to recall a transaction is not a defence to a claim based upon it.   Even without any evidence in reply proving the receipt of the cheques individually, the plaintiffs would have  got  to  the  point  of  justifying  summary  judgment  just  by  verifying  their

statement of claim.  It then became incumbent upon the defendant to produce some evidence negativing the position.   So far as cause of action 13 is concerned the defendant did in fact annex to his affidavit copies of the bank statements relating to his “on call” account.  Unfortunately while he provided accounts for earlier years he did not provide a copy of the bank statement relating to the period in which 24 June

2009, the date of the advance, fell.

[57]     Having regard to the overall state of the evidence that has been provided by the plaintiffs, which was compelling evidence that the advances were in fact received by the defendant, I asked Mr Connolly what other evidence could the defendant possibly point to which would provide assistance on this point?   I record that no satisfactory explanation was forthcoming

[58]     The allegation and counter allegation in this case involve contrary positions of fact.  In general terms the Court will not determine contested issues of fact on a summary judgment application.   However, what distinguishes this case from the usual is that there is no affirmative and definite statement by Mr Woods that he did not receive the money.  He says that he did not recall receiving it.

[59]     On the other hand, the plaintiff’s evidence is categorical that the advance was made and the account which the plaintiff has given is supported by contemporaneous documents including those held by third parties with no interest in the proceedings which show that Mr Woods and another person actually received the money.  In

these circumstances the Court is required to take a robust approach and I conclude that the defendant did receive the money and has no defence available to him in respect of this cause of action.

12th loan

[60]     The twelfth loan was  alleged to be in the sum of $47,000 advanced from the ISSL to Mark Woods on 22 December 2008.  The twelfth loan agreement provided that interest was payable on that amount at the rate of 10.9%.

[61]     The statement of claim alleges that the terms and conditions of the loan included the following:

a)        it  was  an  implied  term  that  the  principal  sum  of  $47,000  was repayable upon demand;

b)       interest was payable at the rate of 10.9% per annum.

[62]     The loan document states:

ISS Ltd agrees to advance the sum of $47,000 to M Woods.  Interest is to be at the FBT rate of 10.9%

[63]     The notice of opposition states:

The defendant says the amount is not repayable until the sale of shares he owns in the company United Cleaning Services Limited are sold (sic).  The majority of the shares in United cleaning Services Limited are owned by either the First and Second Plaintiff or both.

[64]     In the affidavit filed the defendants says:

a)       The agreement “if there is one is an agreement to advance”;

b)“I do not recall this amount of money being advanced to me in any capacity”;

c)        He says that his bank statements do not show the amount of $47,000 being paid to his bank account;

d)He states (and this appears to be correct) that no schedule of interest or principal was provided.

[65]     Significantly   there   is   no   affidavit   evidence   concerning   the   pleaded arrangement that the loan was not to be repayable until shares were sold.  That part of the defence therefore does not need to be considered further.

[66]     There is no arguable defence that the money was not advanced to Mr Woods. The plaintiff has established through verifying statement of claim on oath that the sum was repayable on demand.  In any event, for the reasons that I gave at paragraph [25], the amount advanced would now be repayable together with interest.

The 13th loan

[67]     In the plaintiffs’ statement of claim it is alleged that:

98.      By an agreement in writing dated 24 June 2009, the second plaintiff as lender agreed to advance the sum of $30,000 to the defendant as borrower.

[68]     It was further alleged that it was an implied term that the principal sum of

$30,000 was repayable on demand and that interest was payable at the rate of interest charged by the Inland Revenue Dept for employee loans.  Further, it was alleged that the sum of $30,000 was advanced to the defendant on 23 June 2009.

[69]     The document produced in evidence to support the loan is dated 24 June 2009 and reads:

As discussed ISSL Ltd will advance the sum of $30,000 with interest to be charged at the IRD rate for employee loans.

[70]     The notice of opposition which the defendant has filed relevantly reads:

(xiii)    The Defendant says that the money is not repayable on demand and is payable on the (sic) event of shares in the company United Cleaning Services Ltd owned by the Defendant being sold.

[71]     In his affidavit in support of notice of opposition the defendants says that he recalled the loan being made to him but that he could not in fact find

“it being deposited in my personal bank account.  80.  In order to be certain I seek that the Second Plaintiff provides evidence that the money was in fact advanced.   81.   As with all the other “loans” no schedule a principal or interest repayable was ever provided. 82.  Again it was treated similarly to all the other loans in terms of the fact that repayment, if any, would be “made” if and when my shares in the company were sold.”

[72]     In a similar way to the process followed with respect to the cheques, the plaintiffs arranged for enquiries to be made about this payment that they claimed they had made to the defendant.   The results of those enquiries established that cheque number 1986 which was the cheque that Mr King says he wrote out was paid into  the  bank  account  of  the  defendant  25  June  2009.    The  chain  of  proof establishing that he received the cheque is convincing.

[73]     That leaves only the defence that the loans were not to be repaid until he sold shares which he might acquire in United Cleaning Services Ltd.  I have already dealt with that defence earlier in this judgment and the comments that I made there are equally applicable to loan 13.

[74]     The defendant does not have an arguable defence under this heading.

Credit Contracts and Consumer Finance Act 2003 defence

[75]     The defendant asserted in the notice of opposition that the loan agreements were generally subject to the above Act.

[76]     For  the  plaintiffs,  Mr  Stewart  submitted  that  the  loans  fell  outside  the provisions of s 11(1)(d) of the Act which provides as follows:

11       Meaning of consumer credit contract

(1)       A credit contract is a consumer credit contract if—

...

(d)       when the contract is entered into, 1 or more of the following applies:

(i)        the creditor, or one of the creditors, carries on a business of providing credit (whether or not the business is the

creditor's only business or the creditor's principal business): (ii)     the creditor, or one of the creditors, makes a practice of

providing credit in the course of a business carried on by

the creditor:

(iii)      the creditor, or one of the creditors, makes a practice of entering into credit contracts in the creditor's own name as

creditor on behalf of, or as trustee or nominee for, any other

person:

...

[77]     It was the contention of Mr Stewart that there was no evidence whatsoever that the creditors carried on the “business of providing credit (whether or not the business is the creditor’s only business or the creditor’s principal business)”.

[78]     Mr Connolly submitted that when the plaintiffs initiated the claim against the defendant, they were suing on a total of thirteen loans.  Of these six were made by Mr King and seven by ISSL.  Mr Connolly submitted that the inherent circumstances showed that the business of lending money was being carried on by the plaintiffs or

alternatively it was part of their business as they were in the practice of providing credit in the course of business carried on by them.

[79]     The loans span the period from 14 July 2004 up until 24 June 2009.  That is a period of approximately five years.  That translates in to two or three loans per year, if the number of loans is aggregated for both plaintiffs.  If not, the number of loans roughly translates into something over one loan per year.  Section 3 of the Act which sets out the purposes of the Act opens with the following words:

3        Purposes

The purposes of this Act are—

(a)  to protect the interests of consumers in connection with credit contracts, consumer leases, and buy-back transactions of land; and

...

[80]     The  commentary  on  the  section  generally  that  appears  in  Gault  on

Commercial Law observes that:10

Consumer protection is at the heart of the Act, with the provision of information being the key means of achieving this purpose.  The three uses for which that information is to be used are stated in section 3(b):  to choose between competing financial products, to have the information therefore being committed to a choice and to monitor performance of their own credit obligations.   Other purposes include the making of the rules about fees, interests and costs, the giving to borrowers the ability to have their contracts varied  in  the  event  of  hardship  and  to  prevent  oppressive  contracts  or conduct by lenders.

[81]     There is no evidence in this case that either of the plaintiffs carry on any sort of credit business, let alone one of making consumer loans.  The fact that they are not generally interacting with the market in which consumers seek credit points away from the fact that any of the loans that were made to the defendant were within the scope of the Act.  The number of loans involved shows that the making of loans was a sporadic occurrence and certainly not one with the extent of systemisation and repetitiveness that one would associate with a business.

[82]     Because there is no other evidence concerning this point, the submission for the defendant stands or falls on the basis that the transactions which are the subject

of the proceedings on their own establish that loans were made in the course of businesses.  Given the absence of any other evidence, I do not consider that there is any proper evidential basis for a reasonably arguable defence that the Act applies.  I do not approach matters from the basis that it is necessary for the defendant to show on the balance of probabilities that he has such a defence.  Even at the lower level of showing an arguable defence this ground of opposition must fail.

[83]     Mr Connolly submitted that the point was open because of a decision of the High Court in New Zealand Equities Ltd (In Receivership) v Cole.11  In that case (which was decided under the Act that was the predecessor to the current legislation) loans had been made to an employee of the company and there was a concession that because they attracted interest the provisions of the earlier Act applied and that they were therefore credit contracts.  The position was described in the judgment in the following terms:

It was accepted by Mr Lange that liability for interest during 1986 would have made these loans credit contract pursuant to s15 of the Credit Contracts Act 1981.

[84]     Given the concession noted by the Judge, in the circumstances the Court in this case cannot derive any assistance from the New Zealand Equities Ltd case.

Conclusion

[85]     In my assessment, the defendant does not have an arguable defence to the claims which the plaintiffs bring.

[86]     I have concluded that all of the sums which the plaintiffs say they advanced were advanced.   The conclusion is reached that the ground of opposition that the loans were to be repaid on the eventual sale of the business or the shares in the company cannot amount to an arguable defence because such an arrangement is commercially unlikely and is inconsistent with contemporaneous documents.   The ground of opposition that some of the loans were bonuses is unsustainable because of  inconsistency  with  the  contemporaneous  documents  and  also  because  the

payments involved were not, as would be expected, payments from the employer to

Mr Woods but rather from a third party.

[87]     I accept that questions of credibility are not normally resolved at a summary level   but   in   the   appropriate   circumstances   where   assertions   are   inherently improbable, inconsistent with contemporaneous documents and for other reasons the Court may discount assertions made even if on oath.  In the present case in addition to the matters that I have mentioned, the way in which Mr Woods has gone about giving his evidence in the affidavit on the basis that if one alternative is not accepted then another argument is put forward is not satisfactory and is not suggestive of a deponent who is conscientiously attempting to tell the truth as best he remembers it.

[88]     I have rejected the assertion that the loans that were made came within the boundaries of the Credit Contracts and Consumer Finance Act.  There is no evidence that these plaintiffs were in the business of lending money - whether or not lending money was the creditor’s principal business or only business, or that the plaintiffs made a practice of providing credit in the course of a business carried on by them.  It was also concluded that the infrequency of the loans and the lack of a consumer element to the lending would take the loans outside provisions of the Act in any event.

[89]     The plaintiffs are therefore entitled to summary judgment for the amounts that they claim including interest in terms of the contracts entered into.  In the case of cause of action 11 in which there was no contractual right of interest, I accept the submission for the plaintiffs that they ought to be entitled to interest pursuant to the Judicature Act 1908.

[90]     I would suggest that the parties confer on the form of judgment and on the question of costs.  If the parties are unable to agree I reserve leave to them to make further submissions to me on both of those topics.   To that end the proceeding is listed for mention in my Chambers List at 2.15 p.m. on 14 February 2014.

J.P. Doogue

Associate Judge