McKeown Group Limited v Eldon Mining Limited

[2015] NZHC 3186

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2015-476-000033 [2015] NZHC 3186

BETWEEN

MCKEOWN GROUP LIMITED

Plaintiff

AND

ELDON MINING LIMITED First Defendant

JULIAN JAMES BROWNLEE MEATES Second Defendant

Hearing:	11 December 2015
Appearances:	L A Andersen for Plaintiff M J Wallace for Defendant
Judgment:	14 December 2015

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      The  plaintiff,  McKeown  Group  Limited  (MGL),  sells  fuel.     The  first defendant, Eldon Mining Limited (EML), bought fuel from MGL between December

2014  and  June  2015,  at  a  total  cost  of  $141,948.01.    The  second  defendant, Mr Meates, is the guarantor of the indebtedness of EML for fuel purchased from the time the guarantee was signed on 5 December 2014.

[2]      A number of payments have been made on account of the total purchases in the period in question.  These amount to $69,133.03, leaving an unpaid balance of

$72,814.98.    In  this  proceeding  MGL  seeks  judgment  against  both  EML  and Mr Meates in this sum, together with a further sum of $8,740 which MGL says is a loss it has suffered as a result of a fuel delivery truck being stolen by an unknown third party, when it was in the care of EML.  The total sum claimed, therefore, is

$81,554.98.

MCKEOWN GROUP LTD v ELDON MINING LTD and MEATES [2015] NZHC 3186 [14 December 2015]

[3]      MGL applies for summary judgment against both EML and Mr Meates for

$72,814.98, accepting that there are valid grounds for a dispute in relation to the claim for the converted truck.  Summary judgment will be issued on a claim where a plaintiff satisfies the Court that a defendant does not have a defence to a claim.  The onus of establishing that position rests on the plaintiff, though if the facts presented by a plaintiff establish a position on which that plaintiff would be entitled to judgment, it is for a defendant to lay an evidentiary foundation to demonstrate that it

has a tenable defence.1

Claim against EML

[4]      EML accepts  that  it  does  not  have a defence  to  the claim  by MGL for

$72,814.98.  At the hearing of this application on 11 December I entered judgment against EML for that sum.

Claim against Mr Meates

[5]      Mr Meates accepts that he has liability under his guarantee for debts incurred by EML for purchases of fuel from the time the guarantee was signed.  On this basis, he accepts that he is liable for the sum of $51,814.98, being the balance claimed less

$21,000 which, for reasons I will set out, Mr Meates maintains was wrongly debited to the account by MGL and credited to an account in the name of Natural Stones of New Zealand Limited (Natural Stones).

[6]      Natural Stones and EML are one and the same company.   The company operated an account with MGL for fuel prior to changing its name to EML and prior to Mr Meates giving his guarantee.  Rather than changing the name on the account, MGL opened a new account for EML. The last debit against Natural Stones’ account for a purchase of fuel was on 26 November 2014, and the first purchase by EML on its account was on 11 December 2014.

[7]      The last debit against the Natural Stones’ account left a balance owing to

MGL of $27,645.73.  A direct debit from EML’s bank account to MGL for that sum

1      Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC).

was credited on 29 December 2014 but dishonoured the next day.  Thereafter, three

credits were made to the Natural Stones’ account to clear it. These were:

9 January 2015                  $10,000.00

12 January 2015                  $6,645.73

28 January 2015                $11,000.00

[8]      The first and last of these credits comprise the sum of $21,000 that was initially credited by MGL to the account of EML, then transferred by MGL from that account to the account for Natural Stones.  Mr Meates says he made three payments which added up to $21,000, and that the effect of MGL transferring this sum to the account of Natural Stones was to apply monies he paid as guarantor to debts which predated  his  guarantee.   As  the  guarantee  is  not  retrospective  in  effect,  it  was incorrect of MGL to have taken these steps.  He says the effect is to leave $21,000 more owing by EML on its account than would have been the case if these payments had remained in that account, and he says that he cannot be required to pay the sum of $21,000 under his guarantee of EML a second time.

[9]      There is a superficial attraction in this argument given that if Mr Meates made these payments personally, they appear to have been credited to a debt for which he was not liable, but careful analysis of the account of EML and the account of Natural Stones shows that it is flawed for this reason.  After Mr Meates’ credits amounting to $21,000 had been appropriated by MGL to the account of Natural Stones, EML made further payments to its account amounting to $43,000.   As a matter of standard trading practice, given that Natural Stones and EML are the same company with two accounts, payments by the company would in all probability, and could lawfully, be credited by MGL first to the oldest outstanding debts, namely those on the ledger of Natural Stones.  If the transfers of $21,000 had not been made, there would have been a debit balance in the Natural Stones’ account of that sum. Monies paid by EML into the EML account would have been transferable to the Natural  Stones’ account  to  extinguish  that  debt.    Instead,  of  course,  they  were credited to the EML account and remained there, thereby reducing the debit balance

of that account.  Had they been transferred to the account of Natural Stones, the debit balance of the EML account would have been correspondingly higher.

[10]     This  point  can  be  readily  seen  by  reconstructing  the  accounts  on  the assumption that Mr Meates’ complaint is justified.  After the second tranche of the sum  of $21,000  was  debited  to  EML and  credited  to  Natural  Stones,  the debit balance on the EML account was $41,187.88.  If the transfer was reversed, on the basis it should not have occurred, the debit balance in the EML account would have been $20,187.88.  At that point, that is the liability Mr Meates would have had as guarantor.

[11]     After  that,  further  fuel  purchases  were  made,  and  for  these  the  sum  of

$79,760.13 was debited to the EML account.  Leaving aside payments by EML, this would have raised Mr Meates’ exposure under his guarantee to $99,948.01.  EML did make further payments, which are not now in issue, amounting to $48,133.03.  In the absence of any transfers to the account of Natural Stones, Mr Meates would then have had exposure as guarantor in the sum of $51,814.98.

[12]     However, with the challenged transfers to Natural Stones reversed back as I have described, the account of Natural Stones would still have been $21,000 in debit. As I have said, MGL could have transferred $21,000 from the monies paid by EML into the Natural Stones account, on the basis of clearing the oldest debts of the company first, Natural Stones and EML being one company.   This would have reduced the credits by EML to its account by $21,000 and the consequence would have been that the balance owing on the EML account, all of which is guaranteed by Mr Meates, would be $72,814.98.

[13]     It  follows,  therefore,  that  once  the  account  of  EML is  reconstructed  by reversing the debits Mr Meates challenges, but then debiting to EML and crediting to Natural Stones the same sum from  monies paid by EML itself, the outcome is exactly the same.  Mr Meates owes $72,814.98 as guarantor.

[14]     Finally, I record that an initial challenge to a debit and a credit in the sum of

$5,133.03,  which  are  included  in  the  figures  to  which  I  have  referred  in  this judgment, was not pursued in argument.

[15]     I find that MGL has established that Mr Meates does not have a defence to the claim that he owes MGL $72,814.98 as guarantor.

Outcome

(a)     Summary judgment was entered against Eldon Mining Limited in a sum of $72,814.98 on 11 December, with costs reserved.

(b)     Judgment is now entered against Mr Meates in the same sum. (c)        EML and Mr Meates will pay costs to MGL as ordered below.

Costs

[16]     This claim is a comparatively straightforward debt collection claim, which could have been filed in and decided by the District Court.  Mr Wallace says that any costs award against his clients should be awarded on the District Court scale, relying on r 14.13 of the High Court Rules.  This rule provides that costs ordered in favour of a successful plaintiff must not exceed the costs and disbursements that the plaintiff would have recovered in the District Court  if the proceedings could  have been brought there, unless the Court otherwise directs.

[17]     Some guidance on the factors to be taken into account in deciding to make a direction contrary to the general proposition in r 14.13 may be gained from the judgment of the Court of Appeal in Feuhrer v Thompson.2    There the Court was dealing with an application to transfer a proceeding from the District Court to the High Court.  The Court considered a number of factors relevant to that application, including whether the High Court thought it desirable that the proceeding be heard in the High Court.   Although not directly on point in the present case, the factors

identified by the Court of Appeal for considering that issue provide a useful guide to

2      Feuhrer v Thompson [1981] 1 NZLR 699 (CA).

this Court when considering whether it is appropriate to award costs on the High Court scale because that necessarily, in my view, requires the Court to consider whether there were features of a case making it desirable that it be heard in the High Court.  Factors identified by the Court of Appeal included the amount of the claim, its nature and complexity, the type of issues raised by the pleadings, its public or other importance, and any other considerations relevant to the question of which court the case should be heard in.

[18]     None  of  these  factors  supports  a  finding  that  the  High  Court  was  the appropriate forum for the present case, and Mr Andersen did not argue that any one of these factors was relevant.  His principal point was that had the case been filed in the District Court at Timaru it would not have been considered within the relatively brief span of time before it was heard and decided in this court.  He also says that there was a saving for the defendant, whose counsel practises in Christchurch, as the case was readily able to be transferred to Christchurch for hearing in the High Court. Had it been filed in the District Court in Timaru, it would in all probability have been heard there, at greater expense to the defendants.

[19]     I have considered these submissions, but find that the appropriate course is to follow the general principle in r 14.13.  I therefore award costs to the plaintiff on a

2B basis applying the District Court scales, and disbursements applicable in that

court.

J G Matthews

Associate Judge

Solicitors:

Alistair D Paterson, Dunedin.
McGillivray Callaghan & Co (J A Callaghan), Christchurch.