Lexington Finance Corporation Limited v McHerron HC Christchurch CIV 2010-409-328

[2010] NZHC 927

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-000328

BETWEEN  LEXINGTON FINANCE CORPORATION LIMITED Plaintiff

ANDLORRAINE ELIZABETH MCHERRON First Defendant

ANDPALISADE INVESTMENTS LIMITED Second Defendant

ANDJACKSON STREAM DEVELOPMENTS LIMITED

Third Defendant

Hearing:         16 June 2010

Appearances: L M Dickson for Plaintiff

S J Savill for First and Second Defendants
No appearance for Third Defendant

Judgment:      16 June 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE DOHERTY

Legal principles

[1]      The law on summary judgment applications is trite and need not be traversed in anything other than basic terms, as counsel are agreed on them.  The plaintiff must show on the balance of probabilities that there is no arguable defence on the part of any of the defendants (Pemberton v Chappel [1987] 1 NZLR 1), and secondly that in assessing that defence, the Court will look for appropriate particulars and a

reasonable level of circumstantial detail (Haines v Carter [2001] 2 NZLR 167).

LEXINGTON FINANCE CORPORATION LIMITED V MCHERRON AND ORS HC CHCH CIV-2010-409-

000328  16 June 2010

Issue

[2]      The real issue in this case is whether I can determine on the basis of the evidence  before  the  Court  that  the  plaintiff  has  shown  the  defendants  have  no arguable  defence.    By ‘defendants’  in  this  case,  I refer  to  the  first  and  second defendants.  Whilst the plaintiff proceeds against all three, the third defendant is in liquidation  and  to  continue  the  proceeding  requires  either  the  consent  of  the liquidator or an order of this Court.  The liquidator has not appeared and there are no applications.

Background

[3]      This is a case which began its life as a simple pleading for the repayment of a balance of a loan advanced by the plaintiff to the defendants.   The plaintiff used ABC Finance Limited as an agent to organise financing arrangements for it.  On 22

March 2006 there was a loan advance of $60,000.  When costs were added to that, the total advance was $61,035.   In the records of ABC Finance, that loan was ascribed the number 680420.  With interest, the total amount outstanding at the date of advance (and that also included a fee) was $97,705.40.  That was repayable at the rate of $375.79 per week.  Interest was at 20.51 per cent, with a penalty rate of 26.51 per cent.

[4]      Of the initial advance, $23,994 was used to repay an existing advance from the plaintiff to the defendants under loan number 680327.

[5]      The loan documentation included an agreement to mortgage land.   Almost immediately upon the advance being made the defendants fell into arrears under the arrangement, and as at 27 May 2007, $97,339.61 was outstanding, with a repayment figure of $88,701.07.  The repayment figure took into account a calculation for the rebate of interest for early repayment.   Significantly also at that date there were arrears of $22,557.40 of the payments.

[6]      All  of  that  evidence  is  uncontroverted,  as  is  the  fact  that  only sporadic payments had been received from the borrower defendants.  By 17 November 2009,

$110,589.99 was outstanding.  That included the original amount of interest at the

beginning of the loan, less the rebated interest figure, plus further interest of somewhere near $36,000.

[7]      It is also uncontroverted that on or about 31 May 2007 there was a payment made to ABC Finance by the solicitors for the defendants, and in particular the third defendant, of $90,000.  In fact the trust account records of the defendants’ solicitors show that a cheque for that amount was paid to ABC Finance on 28 May 2008.  It is at this stage that there is a divergence between the plaintiff and the defendants.

[8]      The plaintiff says that amount was paid to ABC Finance in accordance with an agreement whereby the $90,000 was to be spread across a number of loans that were within the purview of the ABC Finance portfolio.   ABC Finance acted, as I have said, as something of a broker or agent for those wanting to lend money wherein there were consolidations perhaps but certainly direct advances made.  ABC Finance seems to have been the vehicle which did the documentation and collected payments.

[9]      I said earlier that this proceeding had at its genesis a straight claim for the amounts advanced by the plaintiff to the defendants.  In fact, the affidavit which was in support of the application for summary judgment was bare in essentials indeed.  It is a 10-page affidavit sworn by Karen Anne Steyaert.  It is so bare in its essentials that in fact it does not even refer to the fact that ABC Finance was involved.

[10]     The opposition to the application brought forth evidence from two of the main players.  The first was the first defendant on behalf of herself and on behalf of the second and third defendants in which she had an interest.  Her evidence was that there had been an agreement whereby the $90,000 that was repaid was to go to complete repayment of the plaintiff’s loan of $90,000.  That was corroborated by a Mr Jeffery Lopas   He was a financial assistant and personal partner of the first defendant.  He was, and I think still is, a finance broker.  He deposed as to having long experience with ABC Finance, and in particular its principal, Mr Roberts.  He deposed that he personally undertook negotiations on behalf of the defendants with Mr  Roberts  that  $90,000  was  to  be  repaid,  and  repaid  only  in  respect  of  the

plaintiff’s loan.  He described those negotiations and also that the matter had been dealt with by the defendants’ solicitors.

[11]     The first plaintiff, in her affidavit in opposition, also referred to that, and by way of evidence produced a note on her solicitor’s letterhead which said the following:

Jackson Stream Developments Limited

We refer to the settlement today.

We advise that we have agreed $90,000 for settlement. ABC Finance Limited

Peter Roberts

Director

[12]     There is a signature, which is accepted as being that of Mr Roberts.   That note is dated 25 May 2007.

[13]     Mr Lopas says that the agreement was in response to Mr Roberts knowing that another property connected to the defendants was about to be sold and that he required  repayment  of  this  loan  for  personal  purposes  of  the  principals  of  the plaintiff.  There is also the evidence, as I have said, that on 28 May the $90,000 was paid to ABC Finance.

[14]     Ms McHerron corroborated the fact that she had instructed her solicitor to make the payment.

[15]     Whilst Mr Roberts filed an affidavit in reply, he has not directly contradicted that there was this agreement.  He has done so obliquely, but has not tackled it head- on.  He says there were four separate loans which the defendants jointly had from various principals of ABC Finance.  As at 6 December 2007 the defendants had a book (if I can call it such) which had $625,593.25 outstanding.  He said that after the apportionment of the $90,000 had been made across the various accounts there was a demand  made  on  two  separate  occasions  of  the  defendants  through  the  first defendant.

[16]     When one looks at the letters of demand, they included a schedule of loans which were then administered by ABC Finance.  The letter referred to “a schedule of loans with our company as at 30 November 2007”.  The schedule referred to eight separate account numbers.   The loans were identified with only that number, the balance  as  at  30  November  2007,  and  the  amount  required  to  repay  as  at  30

November 2007.  It is clear that some of the loans related to the first defendant and other third parties, and not to the second and third defendants.

[17]     The only evidence we have of the treatment of the $90,000, other than the sworn statements of Ms Steyaert and Mr Roberts, are contained in an exhibit to Ms Steyaert’s affidavit in support of the application.  That, I think it is clear, is a copy of ABC Finance’s ledger.  It shows that on 31 May there was a credit of $11,299.32 to that account.  Thereafter there are a number of weekly amounts of $375.79 which have been applied.  There is no evidence as to why that was done.   I would have thought that in a transaction where there was a specific amount being applied it would have been applied all at the same time and then to the oldest debt.  That was not done.

[18]     The  real  nub  of  the  issue  is  what  was  the  agreement  in  relation  to  the

$90,000.  If Mr Lopas is right and there is no indebtedness then there is a defence. The only evidence that he is not right comes from Mr Roberts.  His evidence has a conflict on the arrangement and as I have said, he has not quite categorically refuted it.

[19]     There is also his evidence about later payments which have been made in accordance with the negotiated agreement.  It is unclear where those later payments came from, except the first defendant says she has no knowledge of where they came from but thought they might be reasonably explained by ABC Finance or even the plaintiff making some sort of adjustment in their accounts.

[20]     There is some force in the fact that Mr Roberts sent the letters of demand in December 2007, but the lack of response might reasonably be explained by the multitude of loans and the lack of specificity in the information given either by Mr Roberts or ABC Finance.

[21]     Also, to counter that, there is the evidence of Mr Lopas that he did raise issues with Ms Steyaert in 2007 that there had been a repayment of the total of this loan.  That is uncontradicted.

[22]     Therefore the only corroborative evidence is of the ledger account of loan

68420.   That, as I have said, is the ledger account of ABC Finance.   There is no primary documentation to show where or who those later payments came from.  That is, there is nothing to refute the first defendant’s assertion that the ledger reflects some internal adjustment of the accounting by either the plaintiff, ABC Finance, or Mr Roberts.

[23]   There has been some to-ing and for-ing evidentially in relation to this application, and leave was given to the defendants to file further affidavits relating to matters which arose in the affidavit in reply filed by the plaintiff and from Mr Roberts.  Clearly there was always going to be the issue of ABC Finance in these transactions, and the fact that ABC Finance was the agent of the plaintiff in my view meant the Roberts information should have been before the Court far earlier.  That has some bearing, because lately I refused leave for the plaintiff to file further evidence in reply to the reply evidence (of the defendants) to the reply evidence (of the plaintiff).  It shows something of the difficulties.

[24]     But I need return to the nub of what was the agreement about the $90,000. There are necessarily to be findings of credibility which will determine this case. Even taking a robust approach to the affidavit evidence using the Bilbie Dymock Corporation Limited v Patel (1987) 1 PRNZ 84 (CA) approach, the matter really cannot be determined on the affidavit evidence.   There is sufficient raised by the defendants to show that they might have an arguable case.  To put it another way, the onus on the plaintiff has not been discharged, and the answer to my original question of whether or not I can determine on the basis of the evidence before the Court that the plaintiff has shown the defendants do not have an arguable case, is ‘no’.

[25]     The application is dismissed.

[26]     I set costs on a 2A basis to the respondent, but they will be costs in the cause.

[27]     This matter need now proceed, and I make the following timetable orders:

i)        A statement of defence is to be filed and served by 30 June

2010.

ii)Each party will file and serve a list of documents verified by affidavit by 14 July 2010.   That list and affidavit need not refer to any document  which is already in evidence in the affidavits in support or opposition to the application for summary judgment.

iii)      Any interlocutory application is to be filed and served by 28

July 2010.   Such application will be allocated a date for the next case management conference.

iv)I adjourn the substantive proceeding to a case management conference at 2.30 p.m., 24 August 2010.

v)Counsel   are   to   file   a   memorandum   in   respect   of   that conference (a joint one, if there is agreement) three working days prior to it.   Counsel should deal with any outstanding matter to progress this case to trial.   That will include the contemplation   of   whether   or   not   a   judicial   settlement

conference would be an appropriate response.

ASSOCIATE JUDGE DOHERTY

Solicitors:

Malley & Co, Christchurch
R A Fraser & Associates, Christchurch