McCollum v Thompson

[2014] NZHC 3179

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1958 [2014] NZHC 3179

IN THE MATTER

of an application for summary judgment

under High Court Rule 12.4

BETWEEN

ALLAN ROY MCCOLLUM, NANCY MARGARET MCCOLLUM AND TERENCE NEIL WALKER

Plaintiffs

AND

DAVID JOHN THOMPSON and JOSEPHINE RUTH MACBETH Defendants

Hearing:	5 December 2014
Counsel:	L Kemp for Plaintiffs W T Nabney for Defendants
Judgment:	11 December 2014

JUDGMENT OF BREWER J

This judgment was delivered by me on 11 December 2014 at 4:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:             Kemp Solicitors (Auckland) for Plaintiffs

Lyon O’Neale Arnold (Tauranga) for Defendants

Counsel:               W T Nabney

MCCOLLUM v THOMPSON [2014] NZHC 3179 [11 December 2014]

Introduction

[1]      The plaintiffs are farmers and the defendants are sharemilkers.  In 2011, the plaintiffs lent the defendants $260,000.   The loan was secured through a General Security Agreement (“GSA”), with the security being dairy cows and other livestock owned by the defendants.

[2]      The defendants, as they accept, breached the terms of the loan and in 2013 the plaintiffs appointed a firm of chartered accountants as receiver and manager pursuant to s 8 of the Receiverships Act 1993.  The receiver then took steps to take possession of livestock which the receiver thought was covered by the GSA.1    The animals were sold.  There was a shortfall.  The plaintiffs, in their statement of claim, put the shortfall as $116,423 plus interest at 15 per cent per annum.

[3]      The plaintiffs plead that the defendants have no defence to this claim and apply for summary judgment accordingly.

[4]      The defendants oppose the application because:

(a)      They have a counterclaim.   They say a significant number of the animals seized and sold by the receiver were not subject to the GSA. They put the value of such stock at between $183,600 and $224,400.

(b)They allege that the receiver failed to obtain a reasonable market price for the stock which was covered by the GSA.   It is alleged that the plaintiffs valued the stock seized at $980 per head whereas the proper market value was between $1,800 to $2,200 per head.   Further, the receiver simply transferred the stock to the ownership of the plaintiffs

at the value determined by the receiver.

1      This is an inference on the material included in the parties’ affidavits. There is no affidavit from

the receiver.

The law

[5]      The onus of proof is on the plaintiffs.  They must establish on the balance of probabilities that the defendants have no arguable defence.  In other words, that there is no real question to be tried.2

Discussion

The counterclaim

[6]      Generally,  a counterclaim  that  does  not  amount  to  a set-off  may not  be regarded as  a defence to an application for summary judgment.3     The Court is entitled to give judgment for the amount claimed by the plaintiffs and direct that the counterclaim be tried separately; but the Court may also dismiss the summary judgment application with directions for future proceedings.4     It depends on the interests of justice, and this can include the extent to which the counterclaim and the plaintiff’s case are interdependent.5

[7]      The counterclaim here is interlinked with the plaintiffs’ case.  Essentially, the receiver, and apparently on one occasion the plaintiffs themselves, took possession of livestock from three different properties.  The livestock were then transferred to the ownership of the plaintiffs, as I have previously related.

[8]      Mr Kemp for the plaintiffs submits that I should nevertheless decide this issue pre-emptively by having regard to clause 17 of the mortgage memorandum which, among other things, provides that:

If in the reasonable opinion of the security holder, the fair market value of the livestock has declined, the party granting the security will on demand provide the security holder with additional security to the satisfaction of the security holder or repay all part of the secured monies.

2      Krukziener v Hanover Finance [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].

3      Grant v NZMC Ltd [1989] 1 NZLR 8 at 12-13.

4      Roberts Family Investments Ltd v Total Fitness Centre (Wellington) Ltd [1989] 1 NZLR 15 at

21.

5      Grant, above n 3, at 13.

annexed to his clients’ affidavits,  I should conclude that the greater part of the

animals alleged not to be covered by the GSA are in fact covered by the GSA.

[10]     The difficulty for the plaintiffs in this area is that they have to discharge their onus by putting admissible evidence before the Court.  There is no evidence that the plaintiffs demanded additional security prior to seizing stock.  There is evidence that a demand was made after stock was seized,6  but there is no evidence as to whether the plaintiffs held an opinion which was reasonable that the fair market value of the livestock had declined.

[11]     Similarly, Mr Kemp, who has an evident knowledge of dairy livestock, made a convincing set of oral submissions on the point of coverage by the GSA of most of the animals in dispute, but there is no evidence to back his submissions.  I give the following example:

The Rhode Island University website tells us that the gestation period for a cow is 282 days.   It translates to 9.25 months.   Incidentally, the jersey’s gestation is slightly shorter – 278 days.   But my short point is you can’t breed the heifer too young.  It’s just not possible.  So by the time January

2013 came along, those 2011 animals could not be first time calvers.  Now,

Mr Thompson’s affidavit says they are.   He says this is the disputed fact.

Whereas our client says, and if you look at the GSA, there is an ample pool of rising one year heifers, two year heifers, all of which would be eligible to be   first   time   calvers.   But   not   the   2011   born   animals.      Now,   in Mr Thompson’s affidavit for the first time he tells us which animals were herd tested.  I’m turning to p139 of the bundle of pleadings and affidavits.  I am looking at a CRV Ambreed New Zealand report and the date of that report says a test date of 8 January 2013. The significance of that date is that it’s high season, I assume in this case in the Waikato, but it’s about one month before the receivers uplifted whatever stock they could get.  On p139 and 140, if you look in the left-hand column you see the date born of these animals.  So you see a 10 3 and a 10 5.  It’s not clear from the table, but that appears to be the birth date of the animal.  The calving date is, of course, shown in another column.  Again that pattern is fairly consistent.  But at no point do you see a 2011 born animal in that schedule.  I’m saying on simple logic there could not be.  I’m also saying on Mr Thompson’s evidence that there isn’t.  Where I get to with that, Your Honour, is that these 53 heifers must be within the description of the GSA simply by virtue of their category and their age.

unrelated to this one.7   The problem with that is that s 50 of the Evidence Act 2006 makes such evidence or acceptance inadmissible.

Whether fair value was obtained

[13]     There is simply no evidence from the receiver as to how the livestock were valued.   It is accepted that the livestock were transferred to the ownership of the plaintiffs at the value determined by the receiver.  The defendants in their affidavit assert an undervalue and exhibit a number of valuations which are not really helpful because they were not valuations made in consideration of the record of production of the cows.    However, the defendants’ allegations include the removal of identification tags which would have assisted with a valuation.  The plaintiffs allege to  the contrary that  the animals  were not  appropriately tagged  when  they were seized. They say any undervalue was the fault of the defendants.

[14]     I  am  left  with  the  situation  that  the  plaintiffs,  as  security  holders,  have acquired valuable livestock in circumstances where the defendants allege an undervalue.  In the absence of any evidence from the receiver as to how the value was calculated, the plaintiffs have not discharged their onus of proof.   There are, also, conflicting views on other important matters.

Decision

[15]     There is no question that the plaintiffs were entitled to exercise their rights under the GSA.  Whether they did so properly, and whether there is any shortfall, is unclear.   Because of this lack of clarity, I do not think I should give judgment on liability.

[16]     The application for summary judgment is dismissed.   The case must now proceed to the standard case management process. The registry will arrange for this.

Brewer J