Memelink v Haines
[2021] NZHC 1992
•3 August 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-497
[2021] NZHC 1992
BETWEEN HARRY MEMELINK
CISCA FORSTER (as trustee of The Link Trust (No. 1)
PlaintiffsAND
QUENTIN STOBART HAINES
First Defendant
BPE TRUSTEES (NO 1) LIMITED
Second Defendant
QUENTIN HAINES PROPERTIES LIMITED
Third Defendant
Hearing: 24–25 June 2021. Submissions 2 and 8 July 2021 Appearances:
D G Livingston for the Plaintiffs D K Evans for the Defendants
Judgment:
3 August 2021
JUDGMENT OF GRICE J
(application for summary judgment for liability and for strike out claims in counterclaim)
Contents
Para
Introduction[1]
Background[8]
The loans[18]
Counterclaim pleadings on alleged contract between the parties[31] Assignment of the finance company loans/repayment of the finance companies[36] The law relating to summary judgment[44]
Procedural history[52]
Leave to apply for summary judgment[55]
Application by plaintiffs for leave to adduce further affidavit evidence[67]
The summary judgment application[72]
Opposition to summary judgment[94]
MEMELINK v HAINES [2021] NZHC 1992
Parties to the deeds of assignment[96]
Repayment of finance company loans before assignment[113]
Official Assignee did not consent[120]No trustee resolutions produced[123]
Section 102 of the Property Law Act 2007[131]
Context of the relationship gave rise to fiduciary obligations[134]
Evidential matters raised[151]
Whether demand has been established[154]
Application for interim payment of $50,000[157]
Strike out application on counterclaim[164]
Law on strike out applications[166]
Further affidavit of Mr Haines[173]
Conclusion[185]
Costs[191]
Introduction
[1] Mr Haines and Mr Memelink, together with their respective family trusts and companies, entered into various professional business relationships from October 2016 until they fell out in August 2018. Their business dealings were complex. Mr Haines, then a lawyer, acted for the Memelink interests in numerous pieces of litigation and in advising Mr Memelink in the period leading up to Mr Memelink’s bankruptcy in August 2018. In the same month Mr Haines handed in his practice certificate to Te Kāhui Ture o Aotearoa | the New Zealand Law Society.1 They entered into commercial deals which were not documented with precision.
[2] As a result of their dealings the Haines and Memelink respective interests became involved in three commercial loans. It is the liability for those loans that is now in issue.
[3] The plaintiffs are Mr Memelink and Ms Cisca Forster, acting as trustees for Link Trust (No. 1) (Link Trust). They are the applicants for summary judgment and strike out, but for simplicity, I will refer to them as the plaintiffs in this judgment. Mr Memelink is a bankrupt and has been since August 2018. At around the same time Mr Haines ceased practice as a lawyer. Mr Haines, his family trust and his company are the first, second and third defendants respectively. For clarity, although they are the respondents to the applications, I will refer to them as the defendants.
[4] Mr Memelink’s family trust, Link Trust, seeks summary judgment on liability only, in relation to debts recorded in the three finance company loan agreements of which it says it took assignment. The three finance company loans were taken out by the Haines’ interests as principal debtors. They were guaranteed and secured by the Memelink interests and (in the case of two loans) over Memelink properties.
[5] Default had been made in repayment of the finance company loans, so the plaintiffs say Link Trust paid out the finance companies and, in return, took an assignment of the loans under formal deeds of assignment. The plaintiffs now seek
1 Te Kāhui Ture o Aotearoa | the New Zealand Law Society is the regulator of the legal profession.
judgment for liability based on the rights acquired under the deeds of assignment against the various Haines’ interests as principal debtors.
[6]The statement of claim pleads one cause of action: breach of contract.
[7] The Haines’ interests oppose the summary judgment application. They point to defects in the assignments in support of their defence. They do not raise any set-offs but have filed a counterclaim which they say is relevant to the context and fiduciary obligations owed by Link Trust and the Memelink interests in relation to the loans.
Background
[8] As I have noted, Mr Memelink and Mr Haines’ business started with Mr Haines acting as the lawyer for Mr Memelink and his interests, in about October 2016. Mr Haines was the solicitor in a firm that did work for Mr Memelink. Mr Haines subsequently left the firm to practise on his own account and Mr Memelink and his interests followed Mr Haines as clients.
[9] The work Mr Haines did as lawyer for the Memelink interests was not conveyancing but was related to the litigation in which the Memelink interests were involved. Mr Haines also dealt with claims against the Memelink interests, which ultimately resulted in Mr Memelink’s bankruptcy in August 2018. Mr Memelink blames Mr Haines for his bankruptcy. He says the finance company loans that his interests were guaranteeing to enable Mr Haines to raise money, were not repaid or serviced by Mr Haines as they should have been. The Memelink interests were then required to finance the defaults as guarantors and owners of property secured under the loans. That is how Link Trust acquired the assignment of the loans.
[10] In addition, Mr Memelink says that his bankruptcy was the result of Mr Haines’ actions as his lawyer leading up to the bankruptcy. This included the compilation of a list of assets and liabilities on behalf of Mr Memelink that was produced for the purposes of persuading creditors to enter an arrangement. It listed, as a liability, a bill of costs for legal fees owed to Mr Haines for fees in excess of
$1 million. This fee note was issued shortly before Mr Haines ceased practice as a lawyer.
[11] Mr Haines faces disciplinary charges in the Lawyers and Conveyancer’s Disciplinary Tribunal as a result of complaints laid by Mr Memelink against Mr Haines.2 The complaints relate not only to the bill of costs but also allegations concerning Mr Haines’ obligations in relation to providing legal advice and concerning an alleged conflict of interest in relation to the loans, the subject of these proceedings. Those charges have been heard by the Tribunal, which has yet to deliver a decision. The disciplinary matters may be put to one side for the purposes of this application, save to say that to some extent the complaints explain why Mr Haines has not pursued any civil claim for his costs against the Memelink interests.
[12] The defendants’ allegations relevant to this application relate to Mr Memelink’s behaviour concerning the settlement and repayment of the finance company loans. Mr Haines said Mr Memelink prevented a timelier and more cost-effective resolution of the loans, so is responsible for losses on the sale of Mr Haines’ home property in Manakau, Levin. This was the subject of a mortgagee sale by Basecorp Finance (Basecorp), the first mortgagee. Basecorp is not one of the finance companies involved in the transactions that are the subject of these proceedings.
[13] Mr Haines’ home was sold by Basecorp in a mortgagee sale in May 2019. The property was initially sold by auction to Mr Haines personally for $810,000. That did not settle. Mr Haines requested the mortgagee to transfer the mortgage to Eastlight Asset Trading No. 5 Ltd. On 15 May 2019,3 pursuant to an agreement for sale and purchase, that company transferred the house to Solutions Group Investment for $813,000, settling on 17 May 2019.
[14] I have been advised by counsel for the plaintiffs that the house was then on sold to Mr Haines’ father.4 Mr Haines presently resides in the house. That is not relevant to these proceedings.
2 Te Kāhui Ture o Aotearoa | the New Zealand Law Society is the regulatory body to whom complaints are made against lawyers. Lawyers and Conveyancers Act 2006.
3 Pursuant to s 102 of the Property Law Act 2007.
4 This was not disputed at the hearing.
[15] The implications and the manner of sale are not directly in issue. Ms Evans, on Mr Haines’ behalf, said that these matters were the subject of the counterclaim, but emphasised that they were not raised by way of set-off in the summary judgment. The counterclaim at present pleads contractual breaches and tortious interference with contractual relations by Link Trust and Mr Memelink in particular. The allegations include failing to provide Mr Haines with redemption details prior to the mortgagee sale after the Memelink interests had acquired the second mortgage interest under a deed of assignment.
[16] The claims as presently formulated are the subject of a strike out application. Ms Evans indicated the counterclaim would be amended following further consideration of the matters raised in relation to the present pleadings to which I refer below. The losses claimed in the counterclaim are not yet quantified. As the allegations raised in the counterclaim are pleaded not by way of set-off their relevance to the present application is largely in relation to context and background.5
[17] A further complication is the fact that Mr Memelink remains bankrupt. He has been adjudicated bankrupt twice but was successful in having the second adjudication of bankruptcy set aside.6 In addition, Mr Memelink and his interests have been pursuing Mr Haines with bankruptcy proceedings. Two attempts have been unsuccessful. I was advised by counsel that a third attempt by Mr Memelink to put Mr Haines into bankruptcy is pending a decision.
The loans
[18] Mr Haines and Mr Memelink had been in a lawyer/client relationship for a few months when they entered into their first loan arrangement. This involved Mr Haines (and his interests) borrowing money from Fico Finance, a commercial lender. This
5 Mr Memelink’s interests attempted to sell Mr Haines’ home as second mortgagee acting under the rights assigned by the finance company to the Memelink interests. This was the subject of an application for interim injunction by Mr Haines. The interim junction and related matters were dealt with in a series of decisions: Haines v Memelink [2019] NZHC 401 [“Interim Injunction Judgment”]; Haines v Memelink [2019] NZHC 1086 (costs); Haines v Memelink [2019] NZHC 2802 (leave to discontinue and costs/lay litigant/legal expenses); Haines v Memelink [2020] NZHC 188 (costs regarding litigant in person). The interim injunction proceedings were discontinued by leave.
6 Memelink v Haines [2021] NZCA 116.
loan was guaranteed by Memelink interests. A property in the name of Link Trust provided security for the loan.
[19] The loans in contention from finance companies, Fico Finance (Fico) and Bright Enterprise Holdings Ltd (Bright), are described in the counterclaim as follows.
[20]In relation to the first Fico loan dated 22 December 2016, the details were:
22.The terms of the unsecured Fico loan were:
22.1Term of 12 months;
22.2Interest rate of 12.95%;
22.3The initial sum borrowed was $79,000 of which $75,000 was available on drawdown the balance being fees and commissions;
22.4The loan was secured by first mortgage against:
a.Unit 16, 5 Wakefield Street, Lower Hutt (Link Trust property).
22.5The borrower was the Quentin Haines Properties Limited
22.6.The loan was guaranteed by:
a.Quentin Stobart Haines;
b.Harry Memelink; and
c.Link Trust (No.1)
[21] The second loan was from Bright. It was dated 21 February 2017 and the details are set out as follows:
25The terms of the Bright loan were:
25.1Term of 12 months;
25.2Interest rate of 10.95%;
25.3The initial sum borrowed was $260,400.00, of which
$240,000 was paid by Petone Law to Langford Law. There was a brokerage fee of $2,500 and an establishment fee of
$6,250. There was an amount for the lenders legal fee which is unknown to the defendants. The defendants have no knowledge of how the balance funds were applied.
25.4The loan was secured by first mortgage against:
a.Unit 4, 44 Bay Street, Lower Hutt (Link Trust property).
25.5The borrower was the Quentin Stobart Haines and BPE Trustees (No.1) Limited as trustees of the QSH Family Trust.
22.6.The loan was guaranteed by:
a.Quentin Stobart Haines;
b.Harry Memelink and Ian Trevor Niell Hamilton as trustees of the Link Trust (No.1).
[22]In relation to the second Fico loan, dated 21 April 2017:
15.The terms of the Fico loan secured by second mortgage were:
15.1Term of 12 months;
15.2Interest rate of 13.95%;
15.3The initial sum borrowed was $261,800.00, of which
$250,000 was available on drawdown the balance being fees and commissions;
15.4The loan was secured by first mortgage against:
a.[two units in Lower Hutt] (Link Trust properties).
15.5The loan was secured by second mortgage against:
a.[a unit in Petone] (Link Trust property); and
b.[a property in Manakau, Levin] (QSH Trust property).
15.6The borrower was the QSH Family Trust.
15.7The loan was guaranteed by:
a.Quentin Haines Properties Limited;
b.Quentin Stobart Haines;
c.Harry Memelink; and
d.the Link Trust.
15.8The loan contained a term at 19 that states:
19 Assignment
19. 1 The debtor and the guarantor acknowledge that:
(a)the debtor has no right assign or transfer this contract; and
(b)the creditor may assign or transfer this contract at any time.
[23] Mr Haines pleads there was further borrowing in September 2017 on the second Fico loan of $20,000 for Mr Memelink to purchase a boat called the Catherine Johnston. The counterclaim says that this loan was for one month and if it was not then repaid the outgoing monthly payments would be increased under the secured loan by $500 per month and a security against the boat was to be registered.
[24] It is common ground that the background to the loan transactions was that Mr Haines wished to settle relationship property matters with his wife and needed money to do so. Mr Memelink offered to help by providing security because Mr Haines was unable to raise the money. The terms of the arrangements that were then put in place between them is the subject of disagreement. Mr Haines says there was a contractual arrangement that was not reduced to writing but involved Mr Memelink and his interests paying the interest on the three loans. Mr Memelink denies this.
[25] I outline in more detail below the alleged contractual arrangements. These were largely put before the Court by way of oral submissions by Ms Evans with Mr Haines seated beside her providing the details. A subsequent affidavit by Mr Haines was filed to which I refer below.7 It became apparent that the contractual situation as was pleaded in the counterclaim was not the same as that which was developed in submissions. Ms Evans indicated she would be filing amended pleadings to better reflect the submissions.
[26] Nevertheless, it is common ground that the Memelink interests borrowed some money from the Haines’ interests, the funding for which had come from a draw down on a Fico finance company loan which was part of the loan arrangement with the Haines’ interests as principal debtor but guaranteed and secured by the Memelink interests.
7 See below at [173].
[27] Mr Haines, in his counterclaim, pleaded that the following loans were provided to the Memelink interests from the monies held in the solicitors, Langford Law’s trust account (Wellington) as follows:
7 March 2017 $10,000.00
16 March 2017 $2,816.14
16 March 2017 $5,000.00
16 March 2017 $21,383.85
20 March 2017 $11,000.00
21 March 2017 $11,000.00
4 April 2017 $12,225.60
[28] The defendants in the counterclaim also say they provided a further loan to the plaintiffs on 18 February 2018 in the sum of $10,000 so that Link Trust could settle a real estate purchase of a property at Awamutu Grove in Upper Hutt. The defendants say that the advances to the Link Trust totalled $83,425.59 and describe them as the Interparty Loans.
[29] The defendants in the counterclaim say that $22,600 of those Interparty Loans was paid by the plaintiffs. The pleadings set out the dates of the various payments making up that sum starting on 21 February 2018, with a payment of $1,000, and the last payment of $200 on 24 August 2018.
[30] The defendants also say that the Link Trust defaulted on its obligations under the further borrowing drawn down on the second Fico loan in that they failed to repay the $20,000 by 21 October 2017. In addition, the defendants say that Link Trust defaulted on the payment of the Interparty Loans and made no further payments.
Counterclaim pleadings on alleged contract between the parties
[31]The terms of the Interparty Loans are pleaded in the counterclaim as follows:
30The terms of the Interparty Loans from the defendants to the plaintiffs were:
30.1The loans were on demand, with the plaintiff agreeing to repay the loans at the rate of the various mortgage payments due under the Bright loan, Secured Fico Loan and Unsecured Fico Loan interest payments;
30.2There was no security for the loans; and
30.3The loans were interest free.
[32] Ms Evans, in her oral submissions, indicated that the arrangement was in fact as follows. Mr Haines had been attempting to purchase his matrimonial home from his former wife but had not succeeded. As a result, Mr Memelink, in about December 2016, had offered to help him. That is when the first Fico loan of $75,000 was drawn down. Mr Memelink could not pay his legal fees and Mr Haines was doing a lot of legal work for him. Mr Haines said he would extend credit for the legal fees if Mr Memelink assisted him. Mr Haines agreed not to invoice for the legal fees. There was no arrangement at that time for the Memelink interests to pay anything on the first Fico loan. Mr Haines was to service that loan.
[33] However, the arrangement that led to the Memelink interests being responsible for the finance company payments was entered into between Mr Haines and the Memelink interests in February 2017, Ms Evans submitted. The agreement was that Mr Haines would not invoice Mr Memelink for the accruing legal fees as long as Mr Memelink made payments of interest on all three loans, the two Fico loans and the Bright loan, to a capped amount equal to the sum owing on the Interparty Loans of
$83,425.59.
[34] Mr Haines says that the Memelink interests did not pay the interest as they agreed, although subsequent payments were made as outlined above, commencing on 21 February 2018.
[35] Ms Evans indicated the counterclaim would be amended to reflect the terms of the contract she had outlined orally.
Assignment of the finance company loans/repayment of the finance companies
[36] By March 2018 the finance company loans were well in default and demands were served. The Link Trust too assignment of the loans and paid the sum of
$517,245.42 to Fico to cover the outstanding monies owing to it and $319,110.41 (or
$319,180.41 by the time of repayment) to Bright. The assignment of the loans from those finance companies is recorded in two deeds dated 7 December 2018.
[37] It is common ground that Link Trust had obtained finance from General Finance Ltd. Mr Haines says that this finance was used to repay Fico and Bright, therefore, as they had been repaid there was nothing owing under the loans and so there was nothing to assign.
[38] The defendants say there is no evidence that the assignment was taken by the Link Trust. It says the assignment was by Mr Memelink and Lynx Trustees Ltd (then a trustee of the Link Trust) in their personal capacities, rather than as the then trustees of the Link Trust. Lynx Trustees Ltd has since gone into liquidation. The evidence of the plaintiffs is that before it went into liquidation, Lynx Trustees Ltd was replaced as a trustee and the present trustees of Link Trust are properly named in the pleadings. This is supported by the production of a deed of retirement and appointment of new trustees.
[39] The plaintiffs say Link Trust took the assignment of the loans and paid out the finance companies. An attempt was made to exercise the powers of sale under the second mortgage, which had been assigned to Link Trust from Fico and was registered over Mr Haines’ home. The first mortgage was to Basecorp Finance. The Haines’ interests obtained an interim injunction to prevent the sale of the home by the Memelink interests.8
8 Interim Injunction Judgment, above n 5.
[40] Following the issue of that interim injunction Mr Haines says he had discussions with the finance companies, which had involved Mr Memelink. However, the Memelink interests did not co-operate with the proposals Mr Haines had for repayment. Therefore, the Haines home was sold by mortgagee sale by Basecorp as first mortgagee. The result was that the second mortgage, which had been to Fico, was not repaid as there was no surplus from the sale. The Memelink interests say that was because the sale was engineered by the Haines’ interests to ensure there was no surplus.
[41] The defendants, in their counterclaim, plead that due to the Memelink interests’ non-cooperation in refinancing the finance company loans before the mortgagee sale there were losses attributable to the diminution in sale value achieved by Basecorp at the mortgagee sale. In addition, the Haines’ interests say that because of the Memelink failure to service the finance company loans they had accrued default interest and so the amounts that were required to be paid to Fico and Bright when the loans were repaid were increased.
[42] The defendants, in their counterclaim, say that all that should have been left to repay on the loans, if the Memelink interests had done as they had agreed, should have been:
(a)Fico loan $79,000
(b)Fico loan $250,000
(c)Bright loan $260,400
(d) Total: $589,400.
[43]I now turn to the summary judgment application.
The law relating to summary judgment
[44] Summary judgments are determined under r 12.2 of the High Court Rules 2016:
12.2Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[45]Elias CJ set out the general approach to summary judgment applications in
Westpac Banking Corporation v M M Kembla New Zealand Ltd as follows:9
Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear,10 novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[46] Elias CJ referred to Pemberton v Chappell, in which Somers J notes that summary judgment will be entered when there is no defence, being:11
The absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.
[47] The Court will be satisfied when it “is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty”.
9 Westpac Banking Corporation v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
10 Pemberton v Chappell [1987] 1 NZLR 1 (CA).
11 At 3–4.
[48]Summary judgments on liability are determined under r 12.3, which states:
The court may give judgment on the issue of liability, and direct a trial of the issue of amount (at the time and place it thinks just), if the party applying for summary judgment satisfies the court that the only issue to be tried is one about the amount claimed.
[49] The authors of McGechan on Procedure point to Ghent v Brinkman as an illustration of the application of r 12.3, in which the High Court declined to accede to the application on liability for the following reasons:12
This is not a case where there is any clear dichotomy between issues affecting liability on the one hand and damages on the other. The claims for aggravated and exemplary damages appear to open up virtually the whole field of the conduct of the respective parties, necessarily leading to an examination of all aspects of the relationship between them. Likewise with the question of the possible reduction of the plaintiffs’ damages. … Thus the Court would perforce have to examine and pronounce upon the very issues which by virtue of a summary judgment would have been presumed to have been decided in favour of the plaintiffs. Not only would that mean that the summary judgment procedure would have conferred little advantage from the point of view of saving expense and time but it would put the Court in the position where it might make findings which would not readily be reconciled with a holding that there was no tenable defence.
[50] In Gidden v AIG New Zealand Ltd, Osborne AJ noted the following principles of relevance to summary judgment applications:13
(a)Commonsense, flexibility and a sense of justice are required.
(b)The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.
(c)The Court will not hesitate to decide questions of law where appropriate.
(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.
(e)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
12 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR12.3.02]; citing Ghent v Brinkman HC Wellington CP379/87, 11 September 1987 at 12–13.
13 Gidden v AIG New Zealand Ltd [2016] NZHC 948 at [61] (footnotes omitted).
(f)In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation — the defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.
(g)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(h)The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.
(i)Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
[51] The plaintiffs only seek judgment for liability today. They say that the quantum dispute should go to trial. However, the plaintiffs also seek payment of $50,000 if liability is established.
Procedural history
[52] Ellis J, on 16 November 2020,14 had requested that Mr Livingston provide the Court with the documentary material relating to the finance company loans. At that time the Court had before it various interlocutory applications relating to these proceedings, including security for costs and a stay, pending the outcome of Law Society disciplinary matters against Mr Haines. Her Honour said:
[3] As indicated to Mr Livingston this morning, I consider it would be useful for the Court to be provided with the following further material prior to that hearing:
(a)The Deed/resolution removing Lynx Trustees Ltd as a trustee of the Link Trust No. 1 and appointing Ms Forster in its stead;
(b)A copy of the Link Trust No. 1 Trust Deed;
(c)Ms Forster’s consent to these proceedings;
(d)The settlement date for the Deeds of assignment annexed as “E” to Mr Memelink’s affidavit;
14 Memelink v Haines HC Wellington CIV-2020-485-497, 16 November 2020.
(e)Proof that settlement occurred;
(f)Proof of notice of the assignments to the defendants (and the date of that notice); and
(g)The plaintiffs’ response to the allegation that the assignments were contrary to an undertaking given to the Court not to deal with the Link Trust’s assets without the consent of the Official Assignee or the High Court.
[53] On 1 February 2021 the matter came before Ellis J.15 In the course of the teleconference discussion, the plaintiffs indicated a possible application for summary judgment. Leave was required because the proceedings, when filed, had not included an application for summary judgment. Mr Dallas appeared as counsel for the second and third defendants. Mr Haines appeared for himself. The Judge recorded:16
[2] After discussion with counsel, however, it has been possible to reach some (if not complete) agreement as to what I hope will be a more expeditious and cost-effective way forward. All I need to do today, therefore, is to make directions that:
(a)The defendants are to file and serve a counterclaim on the lines articulated by Mr Haines in Court today by the close of play on 22 February 2021; and
(b)After considering the counterclaim, the plaintiffs are to file any application for summary judgment by the close of play on 8 March 2021.
[3] There is then to be a further telephone conference scheduled with me in order that consequential orders and directions can be made.
[4] In the event that an application for summary judgment has been filed by the plaintiffs, those orders and directions will likely include:
(a)an order that the plaintiffs pay (by consent) security for costs on a “rolling” basis, in the sum of $7,500; and
(b)directions timetabling the summary judgment application to a hearing.
[5] In the event an application for summary judgment has not been filed, the wider issue of security will need to be revisited (although I record that any future orders in that regard are likely also to be made on a “rolling” basis) and further pre-trial directions made.
[6] Any counterclaim based on the invoice that is presently the subject of the disciplinary matter involving Mr Haines need not be pursued at this time. I record Mr Haines’ advice that the hearing of the complaint is now scheduled
15 Memelink v Haines HC Wellington CIV-2020-485-497, 1 February 2021.
16 Memelink v Haines HC Wellington CIV-2020-485-497, 1 February 2021, at [2]–[6].
for early March. As Mr Livingstone suggested, the enforcement of any judgment obtained by the Memelink interests in these proceedings can, if necessary, be stayed pending the payment of any part of the impugned invoice that is upheld in the disciplinary proceedings.
[54] An order for security for costs was made on 1 February 2021. It was paid late but before the hearing set down for 24 and 25 June. This is also a matter which Mr Haines raises in his recent affidavit of 5 July 2021.
Leave to apply for summary judgment
[55] A dispute has arisen about whether leave was granted to bring the summary judgment application. The plaintiffs say that leave was granted to bring the summary judgment application by Ellis J as indicated in the above minute of 1 February 2021.
[56] The indication that a summary judgment application would be filed had been the subject of discussion before Ellis J on 1 February 2021 at a teleconference when her Honour directed the application should be filed.17
[57] On 19 March 202118 her Honour timetabled the filing of the various documents, including affidavits, leading to this hearing. At that stage, it appears the summary judgment application and affidavits had been filed. In the same minute, reference is made to the fact it was unusual to allow cross-examination of deponents, however, her Honour directed that any notices to cross-examine should be filed and served five days before the hearing date and that matter would be dealt with by the judge hearing the application.19
[58] The issue of lack of leave was raised by Ms Evans at the end of the defendants’ submissions when she also indicated that she opposed reliance on any affidavit by the plaintiffs except one dated 11 March 2021 sworn expressly for the purposes of the summary judgment.
17 See above at [53].
18 Memelink v Haines HC Wellington CIV-2020-485-497, 19 March 2021.
19 At [3].
[59] Mr Memelink’s memorandum filed for the teleconference before Ellis J on 19 March 2021 indicated the application for summary judgment would be in relation to liability only, as well as seeking orders to strike out part of the proceedings. Mr Livingston confirmed those applications had been filed on 11 March 2021. No opposition to the granting of leave was raised. The indication that a summary judgment application might be filed had been raised and discussed at the teleconference on 16 November 2020. Her Honour’s 19 March timetable directions included setting the applications down for a two-day hearing, and directing the filing and service 15 working days before the hearing date, the plaintiffs’/applicants’ synopsis of submissions, any affidavit evidence in reply, and the bundle of authorities. The common bundle was to be filed and served five working days before the hearing date. The defendants were to file and serve a synopsis of submissions and bundle of authorities 10 working days before the hearing date. The Haines’ interests were represented at the teleconference by Mr Haines in person and Mr Dallas for the second and third defendants. The directions appear to have been made with their agreement. No issue as to leave was raised either at the teleconference or following the issue of the minute recording the arrangements.
[60] Ms Evans, at the hearing did not pursue her initial submission concerning leave when the minutes and timetable directions made by Ellis J were pointed out. However, Mr Haines has now taken the issue that leave was not explicitly granted in his recent affidavit dated 5 July 2021 filed after the hearing. He says:
26.During my inspection of the files, I noted that there is no application for leave on the file and there is also no order granting leave for summary judgment. It appears that the Court and the parties just did not tum their respective minds to this issue. I have also read the case law from the Court of Appeal on this topic which refers to the importance of leave and that it is not to be assumed even if there is no opposition.
[61] The requirement for leave is set out in r 12.4(2) of the High Court Rules. There is no guidance in the Rules as to the considerations to be taken into account. A leave application may be oral. It is possible here that the Judge’s attention was not drawn to the fact leave was required. This was because the parties had reached agreement that the application would proceed to a hearing and had agreed on a timetable.
[62] An application for leave is a matter for the court’s discretion. It is up to the party seeking leave to show why it should be granted.
[63]In Stephens v Barron the Court of Appeal noted that: 20
… it is important that leave be dealt with as a prior step to the merits of an application for which leave is required. The criteria for granting leave need to be addressed, even if the merits of the substantive application are, themselves, an important aspect of the leave decision.
[64] In that case the Associate Judge had refused summary judgment and had not dealt with the merits of the application for leave but just the substantive issues. However, despite the above comment the appellate court dealt with the substantive issues in dismissing the appeal. It did not discuss in detail the failure to obtain leave. This appears to have been largely because the matter was not argued in detail before the appellate court.
[65] In this case, according to Mr Livingston, leave was dealt with by consent. He indicated that it had been discussed at the teleconference with the Judge. The fact that the Judge directed the application be filed (in her November 2020 minute) and subsequently timetabled the matter to hearing (in her March minute) supports the fact that it was dealt with by agreement. That position is also supported by the fact that the issue of leave was not raised when either of Ellis J’s minutes referring to the directions to file the summary judgment application or the timetable for this hearing were issued. The parties filed the required material in terms of the timetable. The parties both argued the summary judgment application on its merits. The issue of leave was not raised before me until toward the end of the hearing. Those circumstances reinforce, in my view, that leave was granted by Ellis J although she did not expressly refer to leave being granted.
[66] There is no prejudice to the defendant in the granting of leave. In the event of doubt, I indicated I would have granted that leave today. The interests of justice are served by the matter proceeding to a hearing. It is not appropriate that the arrangements settled at case management conferences are revisited. To permit the
20 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [13].
matter of leave to be argued further would undermine the case management processes which are central to the “just, speedy, and inexpensive determination” of proceedings and interlocutory applications.
Application by plaintiffs for leave to adduce further affidavit evidence
[67] Mr Livingston sought to adduce two further affidavits filed on the plaintiffs’ behalf at the outset of the hearing.21 Objection to these affidavits being filed and served out of time was taken by Ms Evans. The defendants were only served with the affidavits on 13 April, two clear days before the hearing. I indicated I would make a ruling on whether leave was granted to adduce those affidavits following the hearing. I have since further considered the application for leave to file the affidavits out of time and determined that the affidavits should not be received in support of the summary judgment application.
[68] This matter was set down for a two-day hearing. The defendants have had no opportunity to respond to the two new affidavits. The matter was the subject of timetable directions made at a teleconference in March 2021. No application for leave to adduce further evidence was received before the morning of the hearing. Mr Livingston argued that there was nothing much in the affidavits and, in any event, given that two days had been set down for this hearing, the defendants had ample time, from the time that they received the affidavits on 13 April, to file any replies.
[69] Those arguments do not persuade me that the affidavits should be admitted. First, two days is insufficient time for the defendants to respond. Secondly, this matter has been timetabled for some time and if the plaintiffs had wished to file further evidence it should have made an application for leave in sufficient time for the defendants to consider the affidavits and respond. To allow the filing of these affidavits would be to allow a significant breach of the timetable order. Finally if, as Mr Livingston has submitted, the affidavits add nothing of significance such as to require a response by the defendants, there is no strong interests of justice factor in support of their late admission.
21 The affidavits were filed and served shortly before the hearing and out of time in terms of the timetable directions.
[70] Accordingly, the leave application to adduce the two affidavits out of time is dismissed.
[71] I now turn to the plaintiffs’ case and the evidence to which it points as supporting its claim. Then I will consider the defendants’ grounds for opposing summary judgment and their arguments in opposition.
The summary judgment application
[72] An affidavit of Mr Memelink was filed, dated 11 March 2021, in support of an “Interlocutory Application on Notice for Summary Judgment on Liability and Orders Striking Out Part of a Pleading”. That affidavit verified the allegations contained in the statement of claim and set out the grounds for belief that the defendants had no defence to the allegation.
[73] The affidavit records that in relation to the finance company loans Mr Memelink and Lynx Trustees Ltd (which was replaced as a trustee by Ms Cisca Forster before it went into liquidation) “purchased the assignment”. Mr Memelink says:
[4]…The assignment records an assignment to us but does not go to the trouble of recording that we took the assignment in our trustee roles.
[5]There is absolutely no doubt that the assignment was in our trustee roles.
[6]The Link Trust No. 1 financed the assignment secured over trust property.
[74] The affidavit goes on to say that the defendants had admitted that the assignments had occurred and the Court had seen all the relevant evidence and ordered the defendants to service the loans, which Mr Haines promised to do but he had failed to make any payments.
[75] Mr Memelink’s affidavit of 29 January 2021 responds to Ellis J’s minute of 16 November 2020 requesting various documentation in relation to the Link Trust. Exhibit A of that affidavit includes:
(a)The deed settling the Link Trust, dated 15 February 1995 with Mr Memelink as the settlor and Mr Memelink, A Dekort and E Dekort, as the initial trustees. The power of appointment is vested in Mr Memelink.22
(b)A resolution dated 10 October 2005 recording the resignations of A and E Dekort and appointment of CMS Trustees Limited.
(c)A deed of retirement of CMS Trustees dated 6 August 2010.
(d)A deed of 20 August 2010 records the appointment of Alistair Gordon Gustaffson as a new trustee with Mr Memelink as the continuing trustee.
(e)A deed of 26 August 2010 records the resignation of Mr Gustaffson.
(f)A deed of appointment dated 26 August 2010 appoints Patrick John Renshaw as a new trustee and refers to Mr Memelink as the continuing trustee.
(g)A deed of appointment of Ian Trevor Niell Hamilton is dated 30 July 2013 and records Mr Renshaw as retiring effective from 3 April 2013.
(h)A deed of change of trustees dated 27 April 2017 records the resignation of Mr Hamilton as trustee and the appointment of Lynx Trustees Ltd.
(i)A deed of change of trustee dated 26 August 2019 records the resignation of Lynx Trustees Ltd and appointment of
22 That includes the power to remove a trustee.
Cisca Johnette Forster as a trustee and the appointment of Roy William Bassett-Burr as an advisory trustee.
[76] Mr Memelink’s affidavit of 29 January 2021 attached copies of the deeds of assignments from Fico and Bright to “Harry Memelink and Lynx Trustees Limited”. The affidavit had been provided at the request of Ellis J to provide the further information in the proceedings and supply the relevant documentation. Those documents recording the assignment were referred to in Mr Memelink’s affidavit of 11 March in support of the summary judgment application.
The Bright deed of assignment provides as follows:
(a)It is a deed dated 7 December 2018 between:
(i)Bright (assignor); and
(ii)Mr Memelink and Lynx Trustees Ltd (assignee).
[78]The recitals of the background record that:
BACKGROUND:
A. The Assignor is the Lender under a Term Loan Agreement dated 21 February 2017 (“the Loan”).
1.The Loan was entered into the Assignor as the Lender and Quentin Stobart Haines and BPE Trustees (No. 1) Limited as trustees of the QSH Family Trust as the Borrower. The initial sum advanced was $260,400.00. The amount due and outstanding is $319,030.41
B. The sum total owing to the Assignor is $319,030.41 (“Debt”).
C. The following securities (“Securities”) are held by the Assignor as security for the payment of the Loan
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 21 December 2016 provided by Quentin Stobart Haines;
D. The Assignees have agreed to purchase the Debt and the rights of the Assignor under the Loan from the Assignor for $319,030.41 (“Purchase Price”) on 7 December 2018 (“Settlement Date”).
E. The parties have agreed to enter into this Deed to record the agreements reached.
[79]The operative part of the assignment provides:
OPERATIVE PART:
1.ASSIGNMENT
In consideration of the Purchase Price paid to the Assignor by the Assignees on the Settlement Date, the Assignor transfers, assigns and sets over to the Assignees free of all securities interests and encumbrances of any nature, all its right, title and interest in and to the Loan Agreement, Securities and the Debt.
2.RIGHT TO ASSIGN
The Assignor confirms that it is obliged to assign its rights under the Loan Agreement, Securities and the Debt to the Assignees and warrants that:
2.1The Debt is due and outstanding to the Assignor by the Borrower; and
2.2The Assignor is the sole and unencumbered owner of the legal and beneficial rights and interests in the Loan Agreement, Debt and Securities.
…
4.EVIDENCE OF DEBT
The Assignor shall on the Settlement Date provide to the Assignees, in addition to the executed copy of this Deed:
4.1A statement of the Debt outstanding;
4.2If requested by the Assignee, a notice of this assignment to any borrower and any guarantor;
4.3The Assignor undertakes that all legislation and other legal requirements have been complied with in respect of the Loan from its commencement to the [to the] present time.
b)Documentation provided to include the following documents duly signed where applicable:
–Unlimited All Obligations Deeds of Guarantee and Indemnity referred to in the Background of this Deed;
–Trustees certificates;
–Underlying spreadsheets or similar used to calculate, interest, fees etc, plus invoices supporting the various external charges, such as broker, legal etc
…
[80] The deed is signed by two directors of Bright and by Mr Memelink, witnessed by a solicitor and by Mr Bassett-Burr, who was the director of Lynx Trustees Ltd. His signature was also witnessed by a solicitor.
[81] The second deed of assignment is between Fico, as assignor, and Mr Memelink and Lynx Trustees Ltd, as assignee. Again, the deed does not refer to Mr Memelink and Lynx Trustees Ltd entering the deed as trustees. Relevant to this deed are the following points:
(a)The Fico assignment was sent under cover of letter of 12 December 2018 from Devine Law Ltd to the trustees of Link Trust. The letter attached loan settlement statements from Fico which recorded the settlement calculations as at 7 December 2018.
[82]The relevant parts of the deed dated 7 December 2018 are as follows:
BACKGROUND:
A. The Assignor is the Lender under two Loan Agreements. These are referred to as Loan Agreement ATM16122 (“Loan No. 1”) and Loan Agreement ATM17028 (“Loan No. 2”).
1.Loan No. 2 was entered into on 22 December 2016 between Fico Finance as the Lender and QUENTIN HAINES PROPERTIES LIMITED as the Borrower. The initial sum advanced was $79,000.00. The amount due and outstanding is $110,00[1].54 (final figure)
2.Loan No. 2 was entered into on 21 April 2016 between Fico Finance Limited as the Lender and QSH FAMILY TRUST as the Borrower. The initial sum advanced was $261,800.00. The amount due and outstanding is $394,549.58 (final figure)
B. The sum total owing to the Assignor is $517,245.42 (includes costs and marketing costs) (“Debt”).
C. The following securities (“Securities”) are held by the Assignor as security for the payment of the Debt under Loan No. 1 and Loan No. 2
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 21 December 2016 provided by Quentin Stobart Haines;
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 22 December 2016 provided by Harry Memelink;
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 22 December 2016 provided by Harry Memelink and Ian Trevor Niell Hamilton as Trustees of the Link Trust (No. 1);
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 26 April 2017 provided by Quentin Haines Properties Limited;
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 26 April 2017 provided by Quentin Stobart Haines;
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 26 April 2017 provided by Harry Memelink;
–Unlimited All Obligations Deed of Guarantee and Indemnity dated 27 April 2017 provided by Harry Memelink and Lynx Trustees Limited as Trustees of the Link Trust No. 1;
–1st ranking all obligations registered mortgage over Record of Title WN39A/608;
–1st ranking all obligations registered mortgage over Record of Title WN39A/606;
–2nd ranking all obligations registered mortgage over Record of Title 435936; and
–2nd ranking all obligations registered mortgage over Record of Title 316958.
D. The Assignees have agreed to purchase the Debt and the rights of the Assignor under Loan No. 1 and Loan No. 2 from the Assignor for
$517,245.42 (“Purchase Price”) on [no date inserted] (“Settlement Date”).
E. The parties have agreed to enter into this Deed to record the agreements reached.
[83]The operative part of the deed provides as follows:
1.ASSIGNMENT
In consideration of the Purchase Price paid to the Assignor by the Assignees on the Settlement Date, the Assignor transfers, assigns and sets over to the Assignees free of all securities interests and encumbrances of any nature, all its right, title and interest in and to the Loan Agreement, Securities and the Debt.
2.RIGHT TO ASSIGN
The Assignor confirms that it has the right to assign its rights under the Loan Agreement, Securities and the Debt to the Assignees and warrants that:
2.1The Debt is due and outstanding to the Assignor by the Borrower; and
2.2The Assignor is the sole and unencumbered owner of the legal and beneficial rights and interests in the Loan Agreement, Debt and Securities.
…
4.EVIDENCE OF DEBT
The Assignor shall on the Settlement Date provide to the Assignees, in addition to the executed copy of this Deed:
4.1A statement of the Debt outstanding;
4.2If requested by the Assignee, a notice of this assignment to any borrower and any guarantor;
b)Documentation provided to include the following documents duly signed where applicable:
–Unlimited All Obligations Deeds of Guarantee and Indemnity referred to in the Background of this Deed;
–Trustees certificates;
–Insurance certificates; and
–Business Credit Contracts.
–Underlying spreadsheets or similar used to calculate, interest, fees, etc, plus invoices supporting the various external charges, such as broker, legal etc
…
(a)The deed is executed by Fico by two of its directors and again Mr Memelink has signed and his signature is witnessed by a solicitor and Mr Bassett-Burr has signed for Lynx Trustees Ltd as a director, witnessed by a solicitor.
[84] Also attached to that affidavit of Mr Memelink of 29 January 2021 are the three original loan agreements (two for Fico and one for Bright).
[85] The Bright settlement statement is also addressed to the QSH Family Trust. On 2 December 2018 the debt totalled $317,215.41.
[86] The loan settlement statements for the Fico loan are addressed to “QSH Family Trust” and “Quentin Haines Properties Limited” and record the settlement calculations as at 7 December 2018 as net balances to repay of $394,549.58 and $110,001.54 respectively.
[87] In addition, exhibited are solicitor’s statements sent to the trustees of Link Trust showing the receipt of finance from General Finance Ltd of the sum of
$905,000 and then the payments out by Link Trust of $517,245.42 to Fico Finance Ltd and $319,110.41 to Bright as “repayment”.
[88] The covering letter from Devine Law Ltd dated 12 December 2018 addressed to the trustees of Link Trust refers in its subject line to “refinance to General Finance Limited”. The letter says:
… We confirm settlement was completed on 7 December 2018 and attach:
1.Our statement showing payments received and made from our trust account on your behalf;
2.Copies of title searches after registration for the three properties mortgaged to General Finance Limited;
3.Copies of the titles for the two Wakefield Street units that were previously mortgaged to Fico (Philco Investments Limited now holds first mortgage security on these units);
4.Copies of the signed loan and mortgage to General Finance. The first payment will be deducted from your account on 7 January 2019 and the loan is due to be repaid on 7 December 2019;
5.A note of our costs, paid by deduction, thank you;
6.Copies of the Fico and Bright repayment statements and supporting invoices;
7.Copies of the Deeds of Assignment executed by those companies.
The transfer of the second mortgage over the Haine’s property has been lodged for registration. We will notify you when registration has occurred.
[89] Copies of titles to two of the secured properties were produced. Their identifiers are WN10B/362 and WN58A/95 and are in the name of “Harry Memelink and Lynx Trustees Limited”. These show a mortgage to General Finance Ltd registered on 7 December 2018.
[90] In addition, a tax invoice from Devine Law Ltd to “The Trustees Link Trust No. 1”, for the refinancing by General Finance Ltd is exhibited.
[91] In relation to the Bright transaction, a copy of an email from the solicitor acting for Bright to Mr Fintan Devine, the solicitor acting for the Link Trust trustees dated 6 December 2018, makes a request pursuant to s 102 of the Property Law Act 2007 to redeem a mortgage and to take an assignment of the relevant security. The subject line reads: “Re: Link Trust (No. 1) – Bright Finance”. It confirms that the solicitor for Bright was meeting her “clients” to sign the “necessary paperwork to transfer the mortgage to your client together with the Deed of Assignment”. The email records that immediately upon that occurring she would accept payment of the amount required to redeem the loan.
[92] Also produced is a letter from Oakley Moran, Wellington solicitors, acting for the Official Assignee, indicating the Official Assignee would consent to Link Trust refinancing by General Finance Ltd to repay Fico and Bright. The Official Assignee made it clear the consent was strictly for the refinancing by General Finance Ltd and did not apply to any future refinancing. It was without prejudice to any claim by the Official Assignee in relation to the equity of Link Trust. The undertaking, signed by Mr Memelink as trustee, and Mr Bassett-Burr as director of Lynx Trustee Ltd as trustee, was produced. It says:
Undertakings to the Court
…
3. We, the trustees of the Link Trust No1(the Trust),a trust as created by Deed dated 15 February 1995, hereby undertake to this Court that as trustees of the Trust, and undertake on behalf of the Trust, that the trustees and the Trust will not, in any way, sell, transfer and/or dispose of any of the Trusts’ property without the written informed consent of the Official Assignee or by on notice permission granted by order from this Court.
[93] That undertaking was attached to a minute from Osborne AJ (as he then was) for use in relation to matters before him relating to the bankruptcy of Mr Memelink.23
Opposition to summary judgment
[94] The defendants’ notice of opposition to the summary judgment sets out the following grounds:
3The grounds on which the respondents oppose the making of the orders are as follows:
3.1The applicants are not party to the loans (the contracts) nor are they party to the purported deed of assignment. There is no privity of contract nor contractual relationship between the parties;
3.2Any such claimed assignment is prevented by s102 Property Law Act.
3.3There has never been any notice provided from the parties contained in the loan agreements that an assignment has occurred.
3.4Mr Memelink who is recorded in the purported deed of assignment is an undischarged bankrupt;
3.5Lynx Trustees Limited who is recorded in the purported deed of assignment has been in liquidation since September 2019.
3.6The applicants are prevented from relying on equity as the applicants do not have clean hands pursuant to the doctrine of clean hands because:
aThey provided this Honourable Court an undertaking not to deal with trust assets or to have the written permission of provided for this purported assignment;
bIn completing a refinance, they reorganised the priority of the security of family and friends ahead of the general body of creditors in Mr Memelink’s bankruptcy. Thereby depriving the Creditors in Mr Memelink’s first bankruptcy.
3.7The Land Registry records that the loans were discharged and not assigned.
3.8The applicants held a security over the property of the first and second respondents pursuant to the purported assignment. They in their own evidence did not respond to the request for a sum to redeem the mortgage.
23 Collins & May Law v Memelink HC Wellington CIV-2018-485-000686, 1 November 2018.
3.9There is an arguable counter claim.
3.10The Link Trust No.1 is an alter ego of Mr Memelink.
4This opposition is made in reliance on:
4.1The affidavit of Quentin Stobart Haines; and
4.2Rules 12.2 and 12.3, Property Law Act 2007; and
4.3The equitable doctrine of clean hands
[95] Mr Haines’ affidavit in opposition is dated 6 April 2021.24 The affidavit states that:
(a)Mr Memelink is an undischarged bankrupt and that Lynx Trustees Ltd was placed into liquidation on 10 September 2019.
(b)Various loans were taken out for the advantage of “both applicants and the respondents” as set out in the pleadings of both parties.
(c)Mr Memelink used the loan facilities for his own benefit purchasing a boat, the Catherine Johnston and that the defendants made further advances to Mr Memelink to purchase a property in Awamutu Grove, Naenae. That property has now been sold and the funds are held by the Official Assignee.
(d)Mr Haines was not provided with any notice of assignment from either Fico or Bright. He has been provided with copies of the purported deeds of assignment, but they make no reference to the trustee of the Link Trust, who is an applicant in the proceedings. A search of the titles for the Memelink properties which provided security for the Fico and Bright loans show the mortgages have been discharged rather than assigned as you would have expected if it was an assignment.
(e)There was an assignment of the mortgage registered against the property that formerly belonged to the Haines’ interests. That title
24 Incorrectly referred to as dated 6 June 2021 in the index to the applicants’ bundle of documents. Mr Haines filed a further affidavit after the hearing, dated 5 July 2021, to which I refer below.
showed a transfer into the names of Mr Memelink and Lynx Trustees Ltd,25 who claimed they held the security as trustees of Link Trust. The search copy of the title to Mr Haines’ home property of 3/97 Honi Taipua Street is exhibited. It shows a mortgage formerly registered to Fico and transferred to Mr Memelink and Lynx Trustees Ltd on 7 December 2018. It also shows the discharge of the registered mortgages following the mortgagee sale on 24 May 2019. The first mortgage was to Basecorp Finance Ltd and the second was the Fico mortgage which was transferred by Fico Finance to Mr Memelink and Lynx Trustees Ltd. The title shows a transfer of the property to Eastlight Trading No. 5 Ltd on 24 May 2019. The final transfer on the title is to Solutions Group Investments Ltd on 24 May 2019.
(f)Mr Haines had sent an email to the applicants requesting a figure to redeem the purported mortgage of the applicants, but Mr Memelink claims not to have seen the email and, in any event, provided an unhelpful response.
Parties to the deeds of assignment
[96] The issues raised by the defendants were first, whether the loans remained extant at the time of assignment and secondly, whether given the lack of express reference to Mr Memelink and Lynx Trustees Ltd as trustees in the deed of assignment, the assignment was to those trustees personally.
[97] The Haines’ interests say that as Mr Memelink is in bankruptcy and Lynx Trustees Ltd is in liquidation the proceedings cannot be progressed without the Official Assignee’s involvement or with his consent as administrator of Mr Memelink’s bankrupt estate and as liquidator of Lynx Trustees Ltd.
[98] It is common ground that under the Insolvency Act 2006 assets held in trust by the bankrupt do not fall into the insolvent estate. Nor is the consent of the
25 Referred to in the affidavit at [13] as “Link Trustees Ltd”. This appears to be an error.
Official Assignee necessary to progress proceedings. Similar provisions apply in relation to companies in liquidation.
[99] The defendants say the deeds of assignment did not record the capacity in which Mr Memelink and Lynx Trustees Ltd entered the deeds of assignment, therefore, they must be taken to have entered the deeds in their personal capacity. Ms Evans said it was not simply that the deeds of assignment did not say the words “in their capacity as trustees” but also the surrounding circumstances. The factors she pointed to include the fact that Mr Memelink speaks of the trust assets as his “own” in some of his affidavits, and that he does not state in his affidavit in support of summary judgment that he is providing the affidavit as trustee.
[100]In his affidavit of 11 March 2021 Mr Memelink says:
3. The defendants are resisting this assignment on an unreasonable and unarguable claim that there was no assignment, and because I didn’t let them discharge a mortgage owed to me, and because of a claim there was a small amount of lending between the parties (representing less than a tenth of what is owed under the assignment).
[Emphasis added]
[101]The immediately preceding and subsequent paragraphs read as follows:
2.These proceedings concern loans which were assigned to me in my role as a trustee of the Link Trust No.1 and which are now outstanding against the defendants/respondents.
…
4.Lynx Trustees Limited (who was replaced as a trustee by Cisca Forster) and I purchased the assignment. The assignment records an assignment to us but does not go to the trouble of recording that we took the assignment in our trustee roles.
5.There is absolutely no doubt that the assignment was in our trustee roles.
[102] Mr Memelink, in that affidavit, goes on to note that Link Trust financed the assignment and provided security over the trust properties. The supporting documentation, including copies of the statement provided to the trustees by the Link Trust’s lawyer, states that the funds to repay the finance company were borrowed
by the Link Trust. Mr Memelink says those funds were used to obtain the assignment of the Fico and Bright loans and repay the finance companies.
[103] There is nothing to suggest that Mr Memelink or the trustee company were acting in their personal capacities. If they had been so acting a further advance in the series of transactions leading to the assignment and repayment of the finance company loans would have been necessary. This would have recorded that the Link Trust had borrowed the money and provided the security to General Finance, but the monies were to be advanced to the trustees in their personal capacity. This would be required to enable the trustees in their personal capacity to take the assignment in terms of the recitals in the deeds which recorded payment made to the assignor (the finance company) by the assignee (Harry Memelink and Lynx Trustees Ltd). There was no suggestion such documentation existed, nor did that transaction appear in the statements surrounding recording the flow of funds.
[104] In addition, it would be highly improbable that General Finance Ltd would provide finance to Mr Memelink personally in December 2018 when he had gone bankrupt in August 2018.
[105] I do not consider Mr Memelink’s statement set out at [100] above provides grounds to say it was Mr Memelink personally who took the assignment of the loan. He expressly says he was acting as a trustee. It was Mr Memelink who engaged in the discussions around that mortgagee sale, but I am satisfied it was as trustee.26
[106] The argument that Mr Memelink and Lynx Trustees Ltd took the assignment of the finance company loans in their personal capacities is related to a submission that Link Trust is a sham and the alter ego of Mr Memelink.
[107] I dealt with the “sham” trust argument raised by Mr Haines in a previous judgment when Mr Haines’ interests sought an interim injunction to restrain the Memelink interests from exercising the power of sale in relation to his home property. The injunction was granted. Ultimately the house property was sold by Basecorp Finance Ltd, the first mortgagee, and the Memelink interests did not receive
26 Interim Injunction Judgment, above n 5.
anything under the second mortgage as there were insufficient funds realised in the mortgagee sale.
[108] One of the grounds raised in support of the application for interim injunction was that there was a serious question to be tried that there should be a declaration that the Link Trust was the alter ego of Mr Memelink. I dealt with that ground as follows:27
[47] The third cause of action pleaded seeks a declaration that the Link Trust is an alter ego of Mr Memelink. This relates to the internal workings of the trust. This is not a cause of action which I consider amounts to a serious question to be tried in these proceedings.
[109] In the interim injunction proceedings I found that there was a serious question to be tried concerning whether the Haines’ interests had been prevented from redeeming the second mortgage (controlled by the Memelink interests as assignees) by the failure of the assignee to provide repayment details following the assignment of the loans and securities by Fico. The injunction was granted but, as outlined above, the first mortgagee sold the property in any event. The substantive proceedings in that action did not go to trial and were discontinued by the Haines’ interests.
[110] The Link Trust has been in existence since 1995. It has bought and sold various properties and entered commercial dealings such as the Fico and Bright loan transactions. Commercial certainty in dealing with third parties is an important factor when considering the validity of a trust. A trust will be a sham and void if the settlor and trustee did not intend to create the rights and obligations of the trust.28 No evidence of that has been produced.
[111] In conclusion, I am satisfied that the assignments by the finance company were made to Mr Memelink and Lynx Trustees Ltd as trustees. I also do not consider that the sham trust point is tenable on the evidence. A trust must act through the trustees as a company acts through its directors. Something more than an allegation is required to ground a claim of a sham trust. There is no good reason to go behind the intention
27 Interim Injunction Judgment, above n 5, at [47].
28 Clayton v Clayton (Vaughan Road Property) [2016] NZSC 29, [2016] 1 NZLR 551 at [113]–[114]; citing Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009] 2 NZLR 289 [“Ben Nevis Forestry Ventures Ltd”] at [33] per Tipping, McGrath and Gault JJ.
to create the trust as evidenced by the trust deed and the operations of the trust in this case.29
[112] In view of my findings I conclude that the deeds of assignment validly assigned the relevant loans to the Link Trust.
Repayment of finance company loans before assignment
[113] The next ground of opposition was that there was nothing to transfer because the finance companies had been repaid with the funds borrowed from General Finance. The loan agreements were choses in action. Therefore, it was argued that as they had been repaid, the deeds of assignment had no indebtedness to transfer.
[114] The provisions for assignment of a legal or equitable thing in action are now set out under ss 50 and 51 of the Property Law Act 2007 as follows:
50How thing in action assigned
(1)The absolute assignment in writing of a legal or equitable thing in action, signed by the assignor, passes to the assignee—
(a)all the rights of the assignor in relation to the thing in action; and
(b)all the remedies of the assignor in relation to the thing in action; and
(c)the power to give a good discharge to the debtor.
(2)Subsection (1) applies whether or not the assignment is given for valuable consideration.
(3)Subsection (1) applies subject to—
(a)section 51; and
(b)any equities in relation to the thing in action that arise before the debtor has actual notice of the assignment and would, but for subsection (1), have priority over the rights of the assignee.
29 The New Zealand Supreme Court set out the legal test for a sham in Ben Nevis Forestry Ventures Ltd, above n 28, at [33]. “In essence, a sham is a pretence. … A document will be a sham when it does not evidence the true common intention of the parties. They either intend to create different rights and obligations from those evidenced by the documents or they do not intend to create any rights or obligations, whether of the kind evidenced by the document or at all”.
(4)The priority of an assignment to which subsection (1) applies and which is not given for valuable consideration is to be determined as if the assignment had been given for valuable consideration.
(5)A legal or equitable thing in action is to be treated as having been assigned in equity (whether the assignment is oral or in writing) if—
(a)the assignee has given valuable consideration for the assignment; or
(b)the assignment is complete.
(6)Subsection (5)—
(a)prevails over any rule of equity to the contrary; but
(b)applies subject to sections 24 and 25.
(7)An assignment to which subsection (5) applies is complete when the assignor has done everything that needs to be done by the assignor to transfer to the assignee (whether absolutely, conditionally, or by way of charge) the rights of the assignor in relation to the thing in action.
(8)Subsection (7) applies even though some other thing may remain to be done, without the intervention or assistance of the assignor, in order to confer title to the rights on the assignee.
51Further consequences of assignment of thing in action
(1)This section applies to a thing in action assigned in accordance with section 50(1) or in equity.
(2)Payment of all or part of the debt to the assignor by a debtor who does not have actual notice of the assignment discharges the debtor to the extent of the payment.
(3)The debt owing by a debtor who has actual notice of the assignment is payable to the assignee.
(4)However, the debt is payable to another assignee if,—
(a)before discharge, the debtor receives actual notice of the assignment of the same thing in action to the other assignee; and
(b)the rights of the other assignee in relation to the thing in action have priority over the rights of the first assignee.
…
[115] Sections 50 and 51 have clarified the law on assignment. Notice is not required for a valid assignment, but it is necessary to ensure that the debt is repaid to the
assignee. Therefore, notice is only required if the assignee wishes to fully protect its position.30
[116] The parties to any contract, including a loan agreement, are free to make it a term of their contract that the rights under it will not be assignable.31 In this case there is no prohibition on assignment in the loan documents. The loan documents specifically allow for assignments.32
[117] In this case the assignments were carried out by way of deeds of assignment. The deeds meet the requirement of the assignments being in writing. The surrounding documentation, including the settlement statement and emails from the solicitors acting for Bright, support the fact that the loan was assigned following which the finance company loans were immediately repaid by the trustees who had received the advance from General Finance.
[118] The point raised by the defendants was that there were references to “repayment” in the statement for settlement provided by the Link Trust’s solicitor on 10 December 2018. That is not evidence of repayment direct to the finance companies by General Finance prior to the assignments. The settlement statement shows the receipt of the General Finance loan monies by the Link Trust and then their disbursement to Fico and Bright in repayment of the finance company loans. The deeds of assignments on their face record that the assignment of the loans was made in consideration of the payment of the purchase price, which was the amount of indebtedness owed to the relevant finance company. This is confirmed in an email from the lawyer acting for Bright which says her clients were first to execute the deed of assignment and then repayment was to occur.33
[119] I am satisfied the transactions were carried out by way of assignments of the finance company loans and then repayment of those loans.
30 Property Law Act 2007, s 51(2) and (3).
31 Henry Holderness and others Commercial Law in New Zealand (online looseleaf ed, LexisNexis) at [6.4.7](c); citing Greg Tolhurst “Prohibitions on Assignment: A Choice to be Made” (2014) 73 CLJ 405.
32 The Fico loan agreements provide for this at cl 19.1(b) of the Terms and Conditions. The Bright loan agreement also does so at cl 32.3 of the Schedule of Standard Terms and Conditions.
33 See above at [91].
Official Assignee did not consent
[120] The defendants also argued that the Official Assignee had not given consent for Mr Memelink to enter the deed of assignment either personally or on behalf of the Link Trust. The Official Assignee was only required to give consent because he had lodged a caveat over the trust properties to be mortgaged to General Finance. The caveat was to protect a claim by the bankrupt estate of Mr Memelink against the equity of the trust. That claim has not yet been crystallised.
[121] In any event, the undertaking to the Official Assignee, which was produced, does not prevent the acquisition of an asset in the form of an assignment of the loans and expressly allows the refinancing for repayment of the finance company loans. The undertaking only agrees not to undertake further refinancing.
[122] Therefore, that ground of opposition does not provide a tenable defence to the summary judgment.
No trustee resolutions produced
[123] A further point raised by Ms Evans was that there were no Link Trust trustee minutes or resolutions produced to evidence the taking of the assignment by the trust. I do not consider such documents are necessary to prove that the trust took the assignment of the loans.
[124] Draft accounts for Link Trust for the year ending 31 March 2020 were produced showing the assets of the trust. The list of assets included three Haines loans, the subject of the assignments, as non-current assets. The accounts also recorded a
$83,426 advance by Quentin Haines. The listed non-current liabilities included the General Finance loans.
[125] The draft accounts also record the following in the Notes to the Financial Statements: “Loans QSH Family Trust. These loans related to assigned loans from Fico and Bright Enterprise Holdings in relation to the QSH Family Trust. These are subject to an ongoing court action for recovery”.
[126] There was no explanation as to why the final accounts for that year are not available. However, for present purposes the production of such accounts is not necessary.
[127]The Link Trust Deed dated 15 February 1995 was produced. It records:
(a)The settlor was Mr Memelink.
(b)The original trustees were Mr Memelink, Arie Dekort and Els Dekort.
(c)Mr Memelink’s children are the beneficiaries.
(d)The discretionary beneficiaries include Mr Memelink.
(e)The date of distribution is 31 December 2074, which is also the perpetuity record expiry date.
(f)Among other powers, the trustees have wide powers to contract, to borrow, give and take security and guarantees and acquire and disperse assets, as well as carry on a business. These transactions may be in such terms as the trustees think fit.
(g)The power of appointment is vested in Mr Memelink.
[128] On the face of the trust deed the trustees have power to raise loans, take assignments, and repay the finance company loans.
[129] In relation to transactions with third parties, prima facie the trustees are entitled to act in accordance with the powers in the trust deed.34 The internal arrangements of the trust generally do not affect the external transactions undertaken by the trust with third parties. If there was an issue relating to the internal documentation of transactions undertaken by the trustees on behalf of the trust that would be a matter for the beneficiaries.
34 This is the principle of non-intervention: see Lynton Tucker and others Lewin on Trusts (20th ed, Sweet & Maxwell, United Kingdom, 2020) vol 2 at [30–104].
[130] Copies of trustee resolutions or minutes are not necessary to prove that the trust took assignment of the loans in this case.
Section 102 of the Property Law Act 2007
[131] Initially the Haines’ interests submitted that s 102 of the Property Law Act (which prohibits requests by current mortgagors to mortgagees to transfer the mortgage to a nominated person) applied to make the assignment illegal. The argument was that as a mortgagor could not make a request for such a transfer, the deed of assignment was tainted with illegality and therefore could not be enforced.
[132] This ground of opposition was withdrawn by Ms Evans in the course of oral argument. It appears no relevant request was made. In any event, the effect of such a request is not clear but it is unlikely to wholly invalidate the assignment.
[133]This ground has been withdrawn.
Context of the relationship gave rise to fiduciary obligations
[134] The next ground of opposition was a general ground relating to the context of the relationship and the history between the Haines and Memelink interests. This is a ground based on general unfairness. While the counterclaim allegations were not pursued by way of a set-off, Ms Evans submitted that the allegations made in the counterclaim provided the background upon which she had elaborated. She submitted the circumstances had given rise to a situation analogous to that in Ghent v Brinkman.35
[135] The counterclaim pleads the first cause of action as a failure to account in contract. The claim is that the Memelink interests failed to provide the Haines’ interests with a figure to redeem the secured Fico loan at a time after it had been assigned to Link Trust. This failure denied the defendants the ability to redeem the mortgage prior to mortgagee sale of the property. This resulted in the mortgagee sale by the first mortgagee, Basecorp. The defendants therefore lost equity in the property equivalent to the difference between the amount owing on the Basecorp loan and the
35 Ghent v Brinkman, above n 12.
registered valuation of the property. The defendants plead that the plaintiffs were “unfairly discriminatory or unfairly prejudicial” to the defendants and breached their obligations under the Property Law Act as a mortgagee and under the secured Fico loan.
[136] The counterclaim describes a contract arising by virtue of the Interparty Loans. They were interest free and upon demand but were related to the obligation by the Memelink interests to service the finance company loans. The amount presently owing on the Interparty Loans, following payments, is pleaded as $60,825.59. The pleadings allege defaults by the plaintiff in failing to make repayments on the secured Fico loans or the mortgage payments on the Bright loan and causing those loans to go into default.
[137] The statement of counterclaim alleges $589,400 would have been the total indebtedness owing to the finance companies, but for the default of the plaintiffs.36
[138] The counterclaim says that the plaintiffs further contributed to the defaults by failing to enter into a refinancing transaction that involved the sale of a property owned by the Memelink interests at 417 Cuba Street, Petone, to Mr Haines’ trust or other entity to be nominated on various terms and conditions. That, pleads the statement of counterclaim, would have resulted in units 14 and 16 Bay Street, which were security for the finance company loans, being discharged and would have resolved both the Fico and the Bright loans. It alleges that this deal did not proceed because Mr Memelink repudiated the agreement and that requests to him, Link Trust and their lawyers, to resolve the matter went unanswered.
[139] Ms Evans emphasised that it was an early stage of the proceedings in relation to the counterclaim. The evidence in support of the counterclaim allegations had not yet been adduced. She emphasised that the allegations in the counterclaim are not put forward by way of set-off but merely to provide context.
[140] The first cause of action in the counterclaim in contract as pleaded is inadequate. As I have noted above there are amendments which Ms Evans has
36 See above at [42].
acknowledged are required to the statement of counterclaim. The pleadings do not set out the details of the contract said to exist between Mr Memelink and Mr Haines (including their respective interests) in the same terms as Ms Evans outlined them in her submissions, made with Mr Haines’ assistance.
[141] Ms Evans also submitted that the contract between the Haines’ interests and Mr Memelink referred to in the counterclaim included an implied obligation of good faith. The plaintiff, according to Ms Evans, breached this by taking an assignment of the Fico and Bright loans, and refusing to provide the redemption figures or to co-operate in the refinancing arrangement which would have seen a Memelink property in Cuba Street sold to the Haines’ interests. It is alleged this would have resulted in the rearrangement of the securities and so, saved the Haines house property from mortgagee sale.
[142] The second cause of action alleges a failure to account in tort. This is an alternative claim in the event that the first cause of action fails, and no contract is found to exist. The tort and relief are described as “tortious interference for the plaintiffs’ interference with the certificate of title for the Property and holding securities against that certificate of title they were not entitled to under the Property Law Act 2007. The damages sought are for the loss in equity in the property”.
[143] Again, the pleading is inadequate. It is difficult to know exactly what tort is being pleaded. The pleading requires amendment and Ms Evans indicated that amendments were to be made.
[144] The third cause of action relates to breach of contract for failure to repay the Interparty Loans. The claim is for a balance owing to the Haines’ interests of
$60,825.59. It is dependent on a breach of the contract being established.
[145] Ms Evans noted that the details of the pleading insofar as the terms of that contract required amending. She emphasised again that the evidence to establish that contract was not presently before the Court. The application to strike out does not include this cause of action.
[146] Ms Evans submitted that the relationship between Mr Haines and Mr Memelink gave rise to fiduciary obligations owed to Mr Haines and summary judgment for liability should be declined because of the behaviour of Mr Memelink. She pointed to the decision in Ghent v Brinkman.37
[147] In that case applications for summary judgment as to liability only were filed in two proceedings which were heard together. The claims were for breaches of fiduciary duties by minority shareholders in relation to transactions for the sale of shares sold by them to the majority. In particular, the plaintiffs alleged that the defendants had breached their fiduciary obligations as directors which were owed to shareholders. Eichelbaum J noted the existence of a fiduciary relationship in those circumstances must depend on all the facts in the particular case.38 In that case to establish the duty required a finding on contested evidence. His Honour noted that if the evidence had existed to establish the fiduciary duty then the evidence of its breach was overwhelming.39 His Honour regarded the disputes on factual matters in the case as important as they went to establishing the whole picture of the relationship between the plaintiffs and defendants. The disputed facts were of particular significance in relation to the element of confidence.40 The Judge went on to say:41
It is essential to the existence of the duty that the relationship is such that one party is shown to repose substantial trust or confidence in the other…
[148] His Honour was unable to say at that stage that he was satisfied that the element of confidence essential to the cause of action was necessarily regarded as established.42 In those circumstances, having regard to the critical disputes of fact concerning the relationship between the parties, the Judge was not satisfied that the defendants had no fairly arguable defence.43 The Judge considered there was no “clear dichotomy” between issues affecting liability on the one hand and damages on the other in that case.44 He was therefore unable to be satisfied that there was no tenable defence45
37 Ghent v Brinkman, above n 12.
38 At 9.
39 At 9.
40 At 10.
41 At 10 and 11.
42 At 11.
43 At 12.
44 At 12.
45 At 11.
and, in any event, he considered that the quantum issue would require examination of the very issues that the summary judgment for liability would determine.46
[149] In this case there is no such dichotomy. The defendants have adopted a considered position of not pursuing any claims by way of set-off. The plaintiffs’ claims do not rely upon the establishment of a fiduciary relationship. The allegations of fiduciary obligations and obligations to act in good faith relate to the plaintiffs taking assignment of the finance company loans and of Mr Memelink failing to participate in arrangements for refinance which included selling his property to Mr Haines. These allegations are raised by way of counterclaim and expressly not by way of set-off. The remedies sought are damages and a taking of account. The allegations are the basis for discrete claims in the counterclaim. There is no evidence before the Court, other than bare assertions, which would support the allegations in any event.
[150] I do not consider there is any tenable defence to the claim for liability based on the allegations of obligations of good faith arising from what is said to be an oral contract. I also note the pleading differs in material respects from the contract actually pleaded in the counterclaim.
Evidential matters raised
[151] There were a number of other matters raised in the notice of opposition and submissions as follows:
(a)No evidence before the Court in this proceeding as to the assets and liabilities of the applicant trust, nor any evidence as to the “significant costs incurred by the Official Assignee and the Liquidators of Lynx Trustees Limited”: This evidence was not required.
(b)No evidence from the Official Assignee or the liquidator of Lynx Trustees Ltd going to the standing of the Link Trust: I am satisfied on the evidence before the Court that the finance company
46 Ghent v Brinkman, above n 12, at 13.
loans were assigned to Lynx Trustees Ltd, (which retired as trustee from that trust before it went into liquidation) and Mr Memelink as trustees. As the property involved, including the rights under the assignments, are trust property the Official Assignee, either in the bankruptcy of Mr Memelink or in the liquidation of Lynx Trustees Ltd, has no direct role in these proceedings. He may seek to protect the interests of the bankrupt estate/liquidation in the event of possible claims, however, that is not an issue before me. The Official Assignee’s evidence is not required in these proceedings.
[152] The synopsis of submissions in opposition to the summary judgment also listed the following documents, which it said were not before the Court. I list those, together with my comments in italics:
41.In relation to this application for summary judgment under HCR 12.2 the evidential burden sits squarely with the applicants. There is no evidence of the following critical documents before the Court at this time:
·There is no assignment from the assignee to the plaintiff. (no evidence of privity of contract): The Deeds of Assignment to the Link Trust have been produced. There is no issue of privity involved. Notice of the assignment by reference to the deeds of assignment was acknowledged by the defendants in the counterclaim and submissions.
·There is not [sic] settlement statement in respect of the assignments of the debt and securities: Statements showing the assignment of the loans and repayment of the Fico and Bright loans have been produced.
·There are no account statements recording the account balance following redemption of the assignee’s mortgage: Statements showing the amounts owing under the finance company loans immediately preceding the assignments have been produced.
·There is no copy of the Fico or Bright discharge given and taken by the mortgagor. (It is noted that the discharge is not registered as a partial discharge): The settlement statement and confirmation of repayment have been produced. The discharge document is not required.
·There is no chronology or evidence provided by the plaintiff recording the order of events (payments, discharges and assignments): This is not pursued. This was completed and provided as noted in the plaintiff’s submissions in reply.
·The liquidators are not party to this proceeding nor is there any evidence of transmission or assignment of the Lynx Trustees Limited’s interest to the plaintiff: There is no requirement for the liquidators to be a party. Lynx Trustees Ltd was a trustee and the deed of retirement of Lynx Trustees Ltd as a trustee and appointment of Ms Forster was produced.
·There is no explanation as to how the assignments became trust property subject to s104 of the Insolvency Act, including:
A)no trustee resolutions supporting the assignments to the trustees;
B)the assignment document itself is silent on the matter of the capacity of the assignees;
The evidence supports the assignment to the Trust. The deeds of assignment on their face are evidence of that and the surrounding documentation supports the fact it was Link Trust that was the assignee, not the trustees personally.
·There are no copies of the section 102 requests (either Fico or Bright) provided in evidence. This was not pursued.
·There are no settlement undertakings provided recording the settlement obligations of the parties at settlement, nor for what consideration what would be given and taken. This is not pursued.
[153] As is apparent from the above, the points have been dealt with either on the basis that the issue was not pursued, as indicated by Ms Evans, the relevant documents have been produced, or the point raised was not material.
Whether demand has been established
[154] There was no issue raised concerning the making of a demand raised in submissions. The statement of claim alleges the loans were in default to the finance companies at the time they were assigned due to the default in payment by the defendants. The defendants further allege that demands were served following the assignment on 17 October 2019, 26 November 2019, and 12 December 2019.
[155] The statement of defence admits that payments of the loans to Fico and Bright were in default. It says it was the plaintiffs who caused the default through failure to make repayments under the loans as agreed. This is a reference to the agreement pleaded in the counterclaim, the details of which are to be amended in the pleadings. The statement of defence also acknowledges the receipt of the demands following the
assignment but deny that the amounts are due. The counterclaim admits that the balance on the loans should have been the sums of $79,000 and $250,000 to Fico and
$260,400 to Bright. These were the original amounts of the finance company advances. The defendants deny liability for default interest accrued. The counterclaim also pleads that the outstanding balance owed by the plaintiffs on the Interparty Loans is $60,825.59. Therefore, there are acknowledgements of both the demands and the fact that there are monies owing in the counterclaim, although a dispute remains as to quantum.
[156] I am satisfied the demands have been made and no payment has been forthcoming. I am also satisfied that there is an amount owing, but the quantum remains in contention.
Application for interim payment of $50,000
[157] Little time was spent during the submissions on the application for an interim payment of $50,000 by the plaintiffs sought if the summary judgment application on liability was successful.
[158]The applicants rely on r 7.71 of the High Court Rules which states:
7.71 Order for interim payment in respect of sums other than damages
(1)A Judge may make an order under subclause (2) if, on hearing the application, the Judge is satisfied—
(a)that the plaintiff has obtained an order for an account to be taken as between the plaintiff and the defendant and for the payment of any amount certified to be payable on the basis of that account; or
(b)in the case of a claim for the possession of land, that even if the proceeding was finally determined in favour of the defendant, the defendant would still be required to compensate the plaintiff for the defendant’s use and occupation of the land before the determination of the proceeding; or
(c)that, on the trial of the proceeding, the plaintiff is likely to obtain judgment against the defendant for a substantial sum of money apart from any damages or costs.
(2)A Judge may order that the defendant pay an amount the Judge thinks just, after taking into account any set-off, cross-claim, or counterclaim on which the defendant may be entitled to rely.
(3)The order does not prejudice any contentions of the parties as to the nature or character of the sum to be paid by the defendant.
[159] There is no order for an account to be taken, nor is there any amount certified to be payable on the basis of that account.
[160] I am not able to say that the plaintiffs will likely “obtain judgment against the defendant for a substantial sum of money apart from any damages or costs”, for the reasons concerning the quantum issues set out above. The exact amount owing is uncertain. While there has been a pleading saying approximately $60,000 would remain on the Interparty Loans and the pleading records the balances originally drawn down on the finance company loans as being the only amounts that could be owing, there is no admission of quantum.
[161] I am satisfied that liability has been established and that there is no tenable defence in relation to liability. However, I am not satisfied that the plaintiffs are likely to obtain judgment for a substantial sum. In addition, taking into account the counterclaim that the defendants are entitled to make, I do not think the payment of
$50,000, or any sum, is just. The quantum must be determined at trial.
[162]Accordingly, I do not consider it is just to make any order for payment.
[163] I now turn to the second application. It is for strike out of part of the defendants’ counterclaim.
Strike out application on counterclaim
[164] The plaintiffs have applied for orders striking out the first and second cause of action on the counterclaim, but not the third cause of action. I have set out the first and second causes of action above.47 They are breach of contract and, in the alternative (as the second cause of action), tortious liability. Both seek damages and accounting by way of remedy.
47 See above at [31]–[35].
[165] I have outlined the counterclaim causes of action above. As will be apparent I do not consider the second cause of action in the counterclaim discloses a reasonably arguable cause of action as presently drafted. The first cause of act as pleaded is defective.
Law on strike out applications
[166]Rule 15.1 of the High Court Rules states:48
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
(2)If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3)Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4)This rule does not affect the court’s inherent jurisdiction.
[167] The Court of Appeal in Attorney-General v Prince set out the relevant criteria for strike-out applications.49 The approach was endorsed by the Supreme Court in Couch v Attorney-General.50 The relevant considerations are:
(a)That the cause of action or defence must be clearly untenable:51
It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed. The case must be “so certainly or clearly bad” that it should be precluded from going forward. Particular care is required in areas where the law is confused or developing.
48 High Court Rules 2016, r 15.1.
49 Attorney-General v Prince [1998] 1 NZLR 262 (CA).
50 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.
51 At [33] per Elias CJ and Anderson J (footnotes omitted).
(b)The jurisdiction is exercise sparingly and only in clear cases, reflecting the Court’s reluctance to terminate a claim or defence short of trial.
[168] In Marshall Futures Ltd v Marshall,52 Tipping J said the difference is between a pleading “which is a total write-off and one which is deficient but is capable of effective repair”. As noted in McGechan on Procedure,53 an application to strike out a “repairable” pleading may be pointless. I also note that the proposed causes of action, at least in relation to the tortious claim, are somewhat novel and the court would, in any event, be slow to strike out novel claims in developing areas of the law.
[169] As is apparent from above, the second cause of action discloses no reasonably arguable causes of action in its current form but can be cured by amendment. The second cause of action as pleaded does not reflect the contract as outlined in submissions. Ms Evans has indicated that the defendants will be making amendments to both causes of action. In that situation a court will almost always permit amendment rather than striking the pleading out.
[170] It would be an inefficient use of the resources of all involved for the strike out to be made in circumstances where the defendants propose to repair the pleading. Mr Livingston urged me to strike it out and require the defendants to file an amended pleading or indeed file a separate claim. That is not efficient, nor is it an approach that the defendants have indicated they wish to take.
[171] In those circumstances, while the plaintiffs have identified defects in the pleadings, I do not propose to strike those causes of action out, but rather allow time for amendments. The parties indicated that they were willing to discuss a timetable which would include the amendment of those pleadings and the movement of the quantum aspect of the plaintiffs’ claim to trial.
[172] In those circumstances the application to strike out the first two causes of action is dismissed. However, the filing of an amended statement of claim meeting
52 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC).
53 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR15.1.08].
the requirements of the rules is directed to be filed and served within 10 days of this judgment.54
Further affidavit of Mr Haines
[173] Following the two-day hearing in this matter I granted leave to the parties to file and serve further affidavits in terms of the following minute of 25 June 2021:55
The leave to file the further affidavits is to enable the respondents to respond to any matters they consider they have not had sufficient time to respond to in view of the matter raised on the afternoon of the 2nd day of hearing that the applicants were not entitled to rely on any affidavits in the bundle of documents apart from the one dated 11 March 2021. I record that there is no apparent prejudice to the respondents in the applicants reliance on the affidavits – among other things: the earlier affidavits were filed and served some time ago and included an affidavit containing relevant documentation filed at the direction of Ellis J in a minute of 16 November 2021 requiring the material (largely documentation relevant to the transactions at issue) to be put before the court; the 11 March affidavit refers to other material in affidavits earlier filed; and the applicants’ bundle of documents served on 13 June contained all the relevant affidavits and exhibits now objected to. Those materials were referred in the course of argument by the respondents in response to the applicants’ applications in the hearing on 24 and 25 June 2021 and it was not until the end of their submissions that this matter was raised.
[174] The further affidavit by the Haines’ interests was to be filed on or before 2 July and that of the applicants in reply by 8 July.
[175] An affidavit was filed by Mr Haines on 5 July. Mr Livingston, for the plaintiffs, objects to the late filing of the affidavit. He responds to the affidavit by way of a memorandum dated 6 July 2021.
[176] The leave to file affidavits was granted largely to ensure there were no matters that the defendants wished to bring to my attention, particularly given the point taken about the reference to other affidavits in the proceedings beyond the affidavit filed in support of the application.
[177] There is no requirement that in an application for summary judgment that only the affidavit of the applicant filed in support of the application may be considered.
54 The parties indicated they could meet a shorter timeframe. However, they did not have the benefit of this judgment in making that commitment.
55 Memelink v Haines HC Wellington CIV-2020-485-497, 25 June 2021 at [2].
There is a positive requirement that the applicant file an affidavit which must verify the allegations made in the statement of claim and depose to the belief that the defendant has no defence setting out the grounds for that belief.56 That required affidavit by Mr Memelink was filed. It was dated 11 March 2021. However, an applicant’s bundle of documents for the interlocutory hearing, in two volumes, was filed in hard copy on 15 June 2021. It had been served on 13 June 2021. That bundle contained, in addition to the affidavit of Mr Memelink dated March 2021, the following affidavits:
(a)Harry Memelink dated 10 November 2020 attaching the finance company loan documents, demands under Property Law Act notices and related documents.
(b)Affidavit of Harry Memelink dated 29 January 2021. This affidavit was prepared at the request of Ellis J and attached the deeds of assignment and other material relevant to the claim.57
(c)Affidavit of Mr Quentin Haines dated 13 October 2020 (in support of a stay of proceedings).
(d)Affidavit of Mr Quentin Haines dated 4 April 2021 in opposition to the application for summary judgment, (incorrectly referred to in the table of contents as dated 6 June 2021).
(e)Affidavit of Joy Marie Rohloff dated 2 October 2020: Ms Rohloff prepared draft accounts for the trust.
(f)Affidavit of Cisca Forster dated 29 January 2021. Ms Cisca Forster is a trustee of Link Trust.
[178] The affidavit in support of the summary judgment by Mr Memelink refers to the finance company loans, the assignments, and the fact that the assignment was made
56 High Court Rules 2016, rr 12.4(4) and 5.
57 Memelink v Haines HC Wellington CIV-2020-485-497, 16 November 2020.
in favour of the Link Trust. It responds to the defences raised and the claims in the counterclaim denying each of them and putting forward reasons for the grounds of belief that the defendants had no defence to the various allegations.
[179] Mr Haines, in his affidavit in opposition, acknowledges the fact of the finance company loans and refers to the pleadings which contain the details of the loans. Mr Haines says he has been provided with copies of the deeds of assignment but says he had not received any notice of assignment from Fico or Bright. He also says that there is no reference to trustees of the Link Trust. Mr Haines denies the assignments were to the Link Trust and says that a trustee who is named as an applicant is not referred to in the deed of assignment. He also notes he had sought a figure to redeem his mortgage from Mr Memelink on 18 January 2019 and received an unhelpful reply from Mr Memelink. That property was sold at mortgagee sale.
[180] The bundle of documents was required to be filed at least five working days before the hearing, at the direction of Ellis J. It was filed some 10 days beforehand and served earlier than that. Under r 9.4,58 therefore, in the absence of opposition, the documents in the bundle are admissible, are what they appear to be, and are deemed to have been signed and sent on the dates apparent on their face.59
[181] The fact that the affidavits relied upon in the summary judgment application were not specifically sworn in support of the application was not raised by the defendants at any stage before the hearing. In fact, it was not raised until toward the end of the defendants’ oral submissions on the second day of hearing. The hearing proceeded on the basis that all the documents in the common bundle were properly before the court.
[182] Mr Haines’ recent affidavit of 5 July 2021 raises no issues beyond those argued at the hearing. In particular, Mr Haines says:
(a)He is concerned that the decision in this matter will be delivered prior to the disciplinary matter being heard: this is a reference to disciplinary
58 High Court Rules 2016, r 9.4.
59 Rule 9.5(1).
matters concerning the circumstances of the loan and, in particular, “the independence of advice” to the Memelink interests. The present application does not deal with the circumstances surrounding Mr Haines’ role as a lawyer nor the nature of any legal advice obtained by the Memelink interests. I note this point was raised before Ellis J on 1 February 2021 at a case management conference. She indicated the enforcement of any judgment obtained by the plaintiffs could, if necessary, be stayed pending the payment of any part of the impugned invoice that is upheld in the disciplinary proceedings.60
(b)There was an agreement as set out in the counterclaim as to repayment of the loans by Mr Memelink: this matter has been dealt with above.
(c)Fico Finance provided funding to Mr Haines’ father to buy back Mr Haines’ home and a Fico director should give evidence as to the circumstances and conduct of the parties: there has been ample opportunity for the defendants to obtain affidavits from a Fico director. None have been filed. In any event, Mr Haines does not specify exactly what matters the Fico directors will attest to and how it would affect liability in this claim. In addition, it was emphasised at the hearing that such evidence would go to the counterclaims.
(d)Mr Haines received no notice of assignment from either Fico or Bright: an effective assignment does not require notice to be given by the assignor. In this case the assignments were evidenced in writing by deed and Mr Haines has acknowledged he has received copies of the deeds. In any event notice is not required to effect an assignment of a chose in action.
(e)The deeds of assignment make no reference to the trustee of the Link Trust who is an applicant in these proceedings: I assume this is a reference to Ms Forster who was appointed trustee of the Link Trust upon the retirement of Lynx Trustees Ltd which has since gone into
60 Memelink v Haines HC Wellington CIV-2020-485-497, 1 February 2021, at [6].
liquidation. I am satisfied on the evidence that Link Trust took assignment of the loan agreements. The evidence produced indicates that the Link Trust, the trustees of which were Lynx Trustees Ltd and Harry Memelink, was the assignee of the loans under the deeds of trust. I am also satisfied that Ms Forster, who is the named trustee of the Link Trust, was appointed trustee of that trust following the retirement of Lynx Trustees Ltd.
(f)The Official Assignee’s and liquidator’s consent to these proceedings are required: I have found the assignments were to Lynx Trustee Ltd and Mr Memelink as trustees. Therefore, neither the Assignee in bankruptcy nor the liquidator of Lynx Trustee Ltd is required to consent to the filing or continuation of these proceedings.
(g)Mr Devine is required for cross-examination: Mr Devine was the deponent of an affidavit which I have ruled is not admissible due to being filed late. In those circumstances there is nothing upon which to cross-examine.
(h)Mr Haines received no demands with supporting calculations in relation to the amounts owing under the finance company loans: the defendants in their pleadings have admitted the finance company loans were in default and monies due. The loans have been assigned to the Link Trust. It is entitled to rely on the defaults as evidence of breach of the loan contracts. Only judgment as to liability is sought and quantum issues are to be dealt with at trial.
(i)The Official Assignee may be investigating Mr Memelink for trading while bankrupt: this is a matter not relevant to the present proceedings.
(j)The Link Trust is a sham trust: I have dealt with that issue above.
[183] Accordingly, no new matters which would give rise to a tenable defence have been raised by the Haines’ interests. The documents in the bundle, including the
affidavits, were properly before the court and I am satisfied they should be accepted as evidence under r 9.5.61 No issues have been raised by Mr Haines which would give me concern that the documents are not what they purport to be or that he was prejudiced by their admission.
[184] A common sense and flexible approach is to be taken in considering applications for summary judgment. What is in the interests of justice is the overriding principle. In this case no arguable defences are apparent. The counterclaim requires amendment. The pleaded counterclaims can be dealt with at trial, together with quantum. The allegations based on a contract, or arrangement between the parties which are said to give rise to fiduciary obligations between them, are imprecise. The allegations are not sufficiently substantiated or even articulated to the extent required to lay a proper foundation for a defence.
Conclusion
[185] As will be apparent, I am satisfied that the plaintiffs have established that the defendants have no tenable defence to the causes of action in the statement of claim insofar as liability is concerned. I am also satisfied summary judgment on liability should be entered in the exercise of my discretion.
[186]Accordingly, judgment is granted against the defendants for liability.
[187] The trial dealing with the counterclaim and quantum should proceed and be set down for trial as soon as possible.
[188] This matter is to be placed in the list for a call not earlier than two months from the date of this judgment to review progress.
[189] The application to strike out the two causes of action in the counterclaim is dismissed.
61 High Court Rules 2016, r 9.5.
[190] A direction is made for the defendants to file and serve an amended counterclaim repairing the defects in the causes of action on or before 10 days from the date of this judgment.
Costs
[191]At the hearing counsel indicated that they agreed:
(a)That I should give an indication of the costs I would have awarded on the summary judgment application but not award those, rather, reserve them to be dealt with following determination of quantum or as otherwise agreed.
(b)I should fix an award of costs on the strike out application.
[192] In relation to the summary judgment application I would have awarded costs on the basis of a 2B categorisation. This categorisation was agreed to be appropriate for the proceedings by counsel at the hearing.
[193] While there was an application for payment of a sum of money included in the summary judgment application which was not successful, I do not consider any discount for that unsuccessful application should be made. That application took up little time at the hearing. I do not consider it justifies any discount from the usual 2B award together with disbursements as reasonable.
[194] In relation to the strike out application, while orders for strike out were not made, the applicants were, for all intents and purposes, successful on this application. The presently pleaded first and second cause of action are defective. The fact I have given the defendants an opportunity to amend the pleadings should not disentitle the applicants to costs on a 2B basis.
[195] Accordingly, I award costs on a 2B basis in favour of the plaintiffs on the strike out application, together with reasonable disbursements.
[196] For the purposes of apportioning time over the two-day hearing I would indicate that 80 per cent of the time at hearing was spent on the application for summary judgment and 20 per cent on the application for strike out.
[197]Orders are made accordingly.
Grice J
Solicitors:
Livingston & Livingston, Wellington for the plaintiffs.
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