Motor Trade Finance Limited v Bentinck St. Limited HC Dunedin CIV 2009 412 893
[2010] NZHC 1139
•1 July 2010
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV 2009 412 000893
BETWEEN MOTOR TRADE FINANCE LIMITED Plaintiff
ANDBENTINCK ST. LIMITED First Defendant
ANDGLENN PETER COWAN Second Defendant
Hearing: 9 March 2010
Appearances: T D Gudmanz for Plaintiff
D J Clark for Defnedants
Judgment: 1 July 2010 at 2pm
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to summary judgment application
Introduction
[1] The plaintiff (MTF) is a finance company. It provides finance for items such as motor vehicles and boats. It provides finance through what it calls “dealer loans”. A motor vehicle or boat dealer will enter into a credit contract with a purchaser, agreeing to lend part of the purchase price to the purchaser, and then assigning the lender’s interest in the credit contract to MTF.
[2] Mr Cowan entered into a finance arrangement with MTF in relation to a
Trophy (boat) in November 2006. He did so in his own name. He subsequently met his obligations under that contract.
[3] In this proceeding MTF sues on four credit contracts and seeks summary judgment for the debts under the credit contracts. The first two contracts are dated
26 January 2007. The later two contracts are dated 12 September 2007. The later two were entered into by Mr Cowan’s company, Bentinck Street Limited, the first defendant in this proceeding. The first two contracts named the borrower as “Bentstick Street Limited” of the same address, with Mr Cowan again as guarantor. MTF says that the spelling of the borrower’s name in the first two contracts is an obvious error and should be rectified which I deal with below at [11] - [17].
[4] The dealer’s interest in the contracts was assigned in each case to MTF on the date of the contract.
[5] Defaults occurred. MTF took repossession steps but was unable to recover any of the goods.
The opposition to summary judgment
[6] The defendants say they have arguable defences to the summary judgment application. Broadly speaking, those defences all relate to the conduct of a Mr Mark Whelan, the principal of the dealer company. The dealer company had originally become a retail dealer with MTF in 2005 under the name “Global Credit Limited”. Its name was subsequently changed to “Whelan Holdings Limited” and further still to “Mark Whelan Limited”.
[7] The defendants’ case is that Mr Cowan may not have signed the contracts but that if he did sign them they were obtained as a result of fraud on the part of Mr Whelan (for which MTF is said to be responsible through Mr Whelan being an agent of MTF). The defendants invoke the doctrine of non est factum. They also rely upon the Contractual Mistakes Act 1977.
[8] I set out the dates of the key contractual events. There are other events which are relevant to the factual issues, but I will deal with those in the course of my
discussion of particular issues:
Date
Event
4 March 2005 Global Credit joins MTF as retail dealer. 22 November 2006 Credit contract financed by MTF between Global Credit and
Mr Cowan for Trophy boat ($40,000.00).
26 January 2007 Credit contracts financed by MTF for Global
Credit/“Bentstick Street Limited” (Mr Cowan guarantor) for
1. Markline Boat ($100,000.00)
2. Scorpion Boat ($130,000.00)
12 September 2007 Credit contracts financed by MTF for Global
Credit/Bentinck St Limited (Mr Cowan guarantor) for
3. Stabicraft Boat ($149,000.00)
4. Maxim Boat ($50,000.00)
28 November 2007 Trophy credit contract rolled over From March 2009 Repossession steps on contracts 1 – 4 initiated by MTF
(with no boats repossessed).
Four contracts – MTF’s contracts
[9] The four credit contract documents, while detailed, are in standard form and relatively straightforward. When the positive defences raised by the defendants are left to one side, the defendants do not suggest there would be any issue as to the right of MTF to judgment for the sums covered by the contracts.
[10] In each case the dealer (initially as “Global Credit Limited” and then under its changed name of “Whelan Holdings Limited”) identifies itself as lender. Pursuant to the dealer agreement in place between the dealer and MTF, the credit contracts were assigned by way of mortgage to MTF. MTF advanced the agreed funds.
[11] The first two contracts named the borrower as “Bentstick Street Limited”. In the third and fourth contracts the borrower is identified as “Bentinck St Limited”.
[12] The plaintiff has produced a copy of the Companies Office records in relation to Bentinck Street Limited. The company was incorporated in February 2004 . The second defendant, Glenn Peter Cowan, is identified as the sole director, having been appointed on 10 November 2006, and as owning 100% of the shares.
[13] Mr Walker of the plaintiff company caused a search of the Register of Companies to be conducted and established that there was no company of the name “Bentstick Street Limited”. The search further established that Mr Cowan had not been the director of any company other than Bentinck Street Limited.
[14] In these circumstances the plaintiff seeks an order by way of rectification replacing the references in the first two contracts to “Bentstick Street Limited” with the words “Bentinck St. Limited”.
[15] Rectification is available where there has been a mis-description of a party in a contractual document: Westland Savings Bank v Hancock [1987] 2 NZLR 21. Equity intervenes to rectify the terms of the contractual document where the agreement recorded in the document does not accurately represent the mutual intention of the parties.
[16] The evidence before the Court as to the nonexistence of “Bentstick Street Limited” and the existence of “Bentinck St. Limited”, with Mr Cowan as its sole director and shareholder, leads to an irresistible inference that the common intention of the parties was that Mr Cowan’s company was to be the borrower. The test identified in Westland Savings Bank v Hancock (at pp 29 – 30) is therefore met in that:
i.The parties formed a single corresponding intention on the point in question.
ii.Such common intention continued to exist in the minds of all parties to the moment of execution of the document to be rectified.
iii.The common intention is objectively apparent from the words or actions of each party (but without the need for formal communication of that intention).
iv.The documents to be rectified do not match the common intention but would do so if rectified in the manner requested.
[17] The order I make below (at [70]) deals with such rectification.
The contractual relationships – agency?
[18] Having focussed on the contracts between the parties, it is convenient to turn next to a contention of the defendants as to agency. The defendants did not identify a particular argument based on agency in their amended notice of opposition but in his submissions Mr Clark developed an argument as to agency.
[19] It was Mr Clark’s submission that the relationship between Global Credit Limited (as lender under the contract) and MTF was arguably one based in agency, even if that could only be described as Global Credit Limited having an “implied actual authority” or “apparent authority” to act on MTF’s behalf.
[20] Because of the late development of the agency argument, Ms Gudmanz for the plaintiff was constrained to meet the agency argument by additional submissions. She would have, if necessary, sought to adduce additional evidence as to MTF’s practices.
[21] In the event, having regard to the express provisions of the contracts in this case it is unnecessary to contemplate further evidence. Mr Clark put some emphasis on the way in which the contractual documents incorporated reference to “MTF”, including with the MTF logo appearing on the documents and references being made
to MTF and “MTF” being defined. But the Court must look beyond the mere existence of such references to precisely what the terms of the contract say.
[22] By the standard terms of each contract, the defendants were required to acknowledge this:
You acknowledge Lender is not an agent of, and is not authorised to act for or bind, MTF or MTFS unless expressly stated in this Contract or under written authority given by MTF or MTFS and produced to you.
[23] Where the lender (through Mr Whelan) signed each contract there is an express reference to his doing so (in addition to other capacities) “as MTF’s agent for financial arrangements and transfers to MTFS”. Those “financial arrangements and transfers” are expressly dealt with in s 2 of the standard terms and they relate to the loan which MTF in due course makes to the lender – they do not relate to the entry into the credit contract itself.
[24] Thus by the express provisions of each contract the parties agreed that Global Credit Limited was not an agent of MTF or MTFS except in the limited regard just referred to.
[25] It is settled law that for a term to be implied it must not contradict any express term of a contract: see the final condition identified by the Privy Council in its five-point test for the implication of terms in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 2 All ER 260 at 268 (per Lord Pearson).
[26] In this case the defendants’ argument as to agency must fail by reason of the express terms of the contracts.
[27] Going beyond the four corners of the contracts, the defendants’ arguments would have also failed by reason of the fact that the broader circumstances do not carry with them a necessary implication of agency. Mr Cowan himself had experience as a dealer, including in a relationship with MTF. The dealer agreement in evidence clearly identifies the fact that as between MTF and its dealers the dealer/shareholder is not an agent of MTF or MTFL, except as stated in the
shareholder agreement. Unsurprisingly, the shareholder agreement does not at any point constitute the dealer/shareholder as an agent for the purposes of entering into credit contracts. The entire structure of arrangements is that the dealers are responsible to themselves for entering into appropriate contracts and that MTF has full recourse against dealers in relation to loans which are in due course assigned to MTF.
The pleading of the doctrine of non est factum – intention to create legal relations
[28] The defendants asserted that the credit contracts did not represent an intention to create legal relations between the parties. They invoked the doctrine of non est factum.
[29] The defendants in their opposition explain the way in which that situation is alleged to have come about as this:
a.The second defendants’ signatures (as Company Director and Guarantor) are either within themselves fraudulent signatures or were obtained fraudulently and by deception by Mr Whelan;
b.As a result of the signatures being fraudulent, the first and second defendants were either –
1. Never a party to the credit contract, or
2.The credit contracts do not represent an intention to create legal relations between the parties.
[30] The essence of the defendants’ case is that a fraud has been perpetrated by Mr Whelan. It is suggested that may have been achieved either through the forgery of Mr Cowan’s signatures on the contracts or (if the signatures are genuinely Mr Cowan’s) by Mr Whelan fraudulently representing to Mr Cowan that the contracts related to the financing arrangements of Mr Cowan’s original Trophy boat.
[31] As there is an obvious and difficult tension between Mr Cowan’s two explanations (the first being that he did not sign the documents at all and the second that if he signed them it was through Mr Whelan’s deception) it is appropriate that the Court focuses on precisely what Mr Cowan has said in his evidence.
[32] Mr Cowan’s evidence is this:
i.Mr Cowan and Mr Whelan were friends and more than business acquaintances.
ii.Mr Whelan arranged the rolling over of Mr Cowan’s credit contract in relation to the Trophy boat in late 2007.
iii. Mr Cowan said at paragraph 13 of his affidavit:
I do recall on a couple of occasions after I signed my credit contract that Mr Whelan contacted me and asked me to sign some further documents. He mentioned that it was in relation to my boat and some further “paperwork” needed to be completed. I took him at his word and signed the documentation that he gave me. I do not recall reading the documentation, always assuming that it was in relation to my boat. I do not recall the specific date of when this occurred as it was very low key and I assumed it was just a “tidying up” of the documents. I had no reason to question him as I trusted him and we had done this a number of times.
iv. Mr Cowan relates the two sets of contracts signed on 26 January 2007 and 12 September 2007 as respectively being around the same times as the original trophy boat credit contract was entered into and as that contract was rolled over.
v. Mr Cowan said at paragraphs 15 and 16 of his affidavit:
It is possible then that what I was signing could have been the credit contracts relied on by the plaintiff given the relatively close dates to when I signed the credit contract for my boat. I always believed however that what I was signing were documents in respect of my boat.
I certainly did not appreciate that I was perhaps signing credit contracts now relied on by the plaintiff. I did not read the documents, believing them, because of Mr Whelan’s statements, to be necessary because of my boat. Mr Whelan simply asked me to sign each one in two places and the different capacities of each signature was not pointed out to me or appreciated by me.
vi. Mr Cowan said at paragraph 7 of his affidavit:
I accept that the signatures on the credit contracts appear to be mine however I cannot be certain of this. I do not recall specifically signing any of these documents and as stated have never been given or received copies of them. I can only assume that if the signatures are mine then they were fraudulently obtained by Mr Whelan.
vii. Mr Cowan said at paragraph 22 of his affidavit:
I have been fraudulently tricked into signing the plaintiff’s credit contracts if in fact the signatures on the agreements are mine. Mark Whelan, a person representing the plaintiff has manipulated circumstances and my relationship with him which has now left me incurring costs and expenses when neither my company nor I have ever received either the advances allegedly made or the boats referred to.
iix. Mr Cowan said this in his second affidavit at paragraph 8:
I do confirm that I do not know if I signed the 4 contracts, I accept the signature is similar but that is all.
The submissions
[33] Ms Gudmanz for the plaintiff submitted that Mr Cowan’s equivocal denials (as to the signatures on the four contracts being his) are not credible. She highlights the internal inconsistencies within the affidavit evidence given by Mr Cowan. Mr Cowan indicates on oath that he recalls “signing some further documents” after the Trophy boat credit contract, and relates the dates of the two sets of contracts to approximate periods at which the Trophy boat credit contract would have been dealt with (initial entry and roll over). He records the precise manner in which Mr Whelan had him sign his name in each relevant place. But Mr Cowan goes on to suggest that he does not specifically recall signing any of these documents. He suggests that the signatures may not be his, although “they appear to be mine”. Mr Cowan has apparently not endeavoured to have the original contracts submitted to document examination to pursue his speculation that he may not have signed the documents.
[34] Mr Clark submitted that what Mr Cowan had deposed was clear and unambiguous. Mr Clark’s summary of what Mr Cowan had expressed “clearly and unambiguously” is that in his first affidavit Mr Cowan had accepted that he:
a) Did sign an agreement in respect of financing a boat that he does own.
b)Was asked by Mr Whelan to come back and resign some further paperwork which he thought had to do with the same boat.
c) As a result of his ongoing trust friendship with Mr Whelan, did not query why he needed to sign any further paperwork.
d)Has never received a copy of the agreements the subject of this proceeding, has not seen the original of the agreements and therefore has not been in a position to confirm whether the signatures are his.
e) Accepts that those signatures are familiar but it left open to whether those could have been fraudulently copied.
[35] While Mr Clark’s summary of various statements made by Mr Cowan may be considered accurate, it does not amount to a set of statements which provide a clear and unambiguous statement as to whether Mr Whelan signed the documents or not.
[36] This Court has repeatedly adopted, in relation to the assessment of evidence in relation to summary judgment applications, the words of Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331 at 341. His Lordship said that the Judge is not bound:
[T]o accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
See also Attorney General v Rakiura Holdings Limited (1986) 1 PRNZ 12 at 14.
[37] The present case presents a good example of a suggested defence which should be rejected by an application of the robustness which Lord Diplock’s observations call for. The overriding thrust of Mr Cowan’s evidence is that he knows he did sign documents around the dates in question – he does not know whether they were precisely the documents being sued upon or not as all he did was sign in spaces as directed by Mr Whelan. Apart from the four contracts in issue, there is no evidence of any other document signed at those times by Mr Cowan. The four contracts are dated 26 January 2007 (as to two) and 12 September 2007 (as to two). The lender’s rights were immediately assigned to MTF and MTF paid out accordingly. The entire sequence (including Mr Cowan’s version of it) compellingly points to the genuineness of the contract signatures. Mr Cowan’s expressed reservations as to the possibility that Mr Whelan may have forged his signature is on
the evidence baseless speculation. Mr Cowan’s evidence is that he trusted Mr Whelan (apparently implicitly) – “I had no reason to question him as I trusted him and we had done this a number of times”. There was no reason for Mr Whelan to forge his friend’s signature when on Mr Cowan’s own evidence his signature was so readily, and indeed on his evidence recklessly, available.
[38] I disregard Mr Cowan’s speculation as to the forgery of his signatures as inherently improbable. It is not arguable that his signatures on the four contracts were forged by another person.
The relevance of the alleged fraud
[39] The defendants’ amended notice of opposition identified as a ground that the second defendant’s signatures had been obtained fraudulently and by deception by Mr Whelan.
[40] There is evidence before the Court indicating that it is at least arguable that a fraud was worked upon Mr Cowan. The fraud in question would have involved Mr Cowan understanding that he was signing documents in relation to the Trophy boat while Mr Whelan was in fact documenting the sale of four further boats pursuant to which MTF would advance to Mr Whelan sums totalling $429,000.00. Mr Whelan would have then been able to invest those funds as he saw fit. The later two loans were for terms of four years with interest capitalised and payments due only at the end of the term. A fraudster would be left with interim payment commitments on the first two loans only, being one third of the principal and accumulated interest in three annual payments. The fraudster would have received around 12 September 2007 more than enough to cover the first annual instalment due (on the first two loans on 26 January 2008).
[41] The defendants have therefore provided sufficient evidence to create an argument that a fraud was worked upon Mr Cowan.
Does the alleged fraud lead to a finding of non est factum?
[42] It is Mr Cowan’s case that Mr Whelan’s conduct led Mr Cowan into not understanding the nature and obligations he entered into when signing the contracts.
[43] Counsel agreed that Saunders v Anglia Building Society [1970] 3 All ER 961 (HL) is the leading authority in relation to the doctrine of non est factum. It was applied as such by Tipping J in Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111.
[44] The principles I adopt in relation to the defendants’ plea of non est factum are these, which I draw directly from the judgment of Tipping J in Bradley West at 120 to 121:
1.The person raising the plea (the proponent) must have signed the document believing it to have a particular character or effect.
2.The document must in reality have a radically different character or effect thus creating a wholly different result from that which was understood by the proponent.
3.The proponent's mistaken belief must have resulted from an erroneous explanation or description of the document given to him by someone else.
4.The proponent must be able to show that, notwithstanding his error, he acted with all reasonable care in the circumstances.
5.If the proponent's mistaken belief arises because, acting in reliance upon a trusted adviser such as a solicitor, he did not take steps to read and understand the document prior to signing it, the plea is not available.
[45] I deal with each of those requirements in order:
1. The evidence indicates that it is arguable that Mr Cowan signed the four contracts (for new loans over particular boats) believing that they were further contractual documentation in relation to the loan on the Trophy boat.
2. The belief as to further documentation in relation to an existing loan for a particular boat arguably creates a wholly different result from that which was understood by Mr Cowan.
3. I have found that Mr Cowan has an arguable case that he was misled as to the documentation by another party.
[46] It is convenient to now consider the fourth and fifth requirements (as enunciated by Tipping J) together.
[47] Mr Clark sought to bring the defendants within the requirements of the plea by suggesting that any consideration of Mr Cowan’s negligence has to be treated with caution in a summary judgment context. Mr Clark submitted that it remains arguable as to whether Mr Cowan was negligent or not. It was suggested that he arguably was entitled to rely on a trusted friend not to trick him. It was submitted that Mr Cowan was trusting but not negligent.
[48] Ms Gudmanz emphasised the importance of the proponent’s absence of negligence. She referred to the judgment of Lord Reid in Saunders, at p 963, where his Lordship said:
The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document.
[49] Ms Gudmanz noted as relevant to Mr Cowan’s negligence the following:
1. Mr Cowan’s own evidence is that he did not read the contracts.
2. Each contract states on its face what the secured asset is (in each case a boat other than the Trophy boat).
3. Each contract states on its face what the total advance is (every advance being for a different sum than another).
4.Each of the four contracts in issue states on its face that Bentinck (or “Bentstick”) was the borrower and Mr Cowan the guarantor, whereas Mr Cowan alone was involved with the Trophy boat loan.
5. Each contract had to be signed twice, once for Bentinck and once by Mr Cowan himself, with the relevant name and capacity being clearly typed in proximity to the space for the signature.
[50] Even on Mr Cowan’s version (that he believed all the documents being signed to somehow relate to the single Trophy boat loan), this was never a transaction in which the parties anticipated they would remain the only parties affected by the contract. A third party, MTF, was always intended to be involved as a lender.
[51] Mr Cowan’s negligence in this case was at the most fundamental and basic level. He did not read the contracts. Such was not mere negligence. It was gross negligence. There is no difficulty in determining that fact in a summary context as the fact emerges from Mr Cowan’s own evidence.
[52] As the fifth element of the analysis of Tipping J in Bradley West indicates, the arguable fact that Mr Cowan may have relied on someone whom he trusted does not overcome the negligence, so as to render the plea available. The law will not allow a plea of non est factum if a person chooses to sign contractual documents without informing him or herself as to their purport and effect. The importance of that approach is at its greatest where third parties are to rely on or be affected by the document.
Relationship between MTF and Global Credit/Mr Whelan
[53] Mr Clark sought to support his argument that the plea of non est factum should be determined at trial rather than through summary judgment by reference the relationship between MTF and Global Credit. He submitted that “the actions of Mr Whelan cannot be distanced from the plaintiff, despite assertion to the contrary”. This flowed from the submissions which Mr Clark had made in relation to agency, which I have already dealt with above and rejected. Furthermore, the plea of non est factum focuses on the time at which the contract is signed. MTF’s involvement as lender arises only after that event.
Conclusion
[54] It is not arguable that the plea of non est factum could apply in this case.
Contractual Mistakes Act 1977
[55] The defendants rely on s 6(1)(a)(i) Contractual Mistakes Act 1977.
[56] Mr Clark submits that the defendants entered into the four contracts as a result of a mistake which was known to Mr Whelan of Global Credit. The mistake relied upon is that Mr Cowan though he was signing paperwork for the Trophy boat agreement. Mr Clark submitted that the knowledge of that mistake on the part of Mr Whelan was then imputed to MTF through Global Credit’s agency.
[57] Ms Gudmanz submitted that the pleading under the Contractual Mistakes Act cannot succeed. I agree.
[58] The mistake relied upon by the defendants is one as to the interpretation of the contracts. Such a mistake is excluded by s 6(2) of the Act.
[59] I adopt what was said by Wylie J in Shotter v Westpac Banking Corporation
Ltd [1988] 2 NZLR 316, at 331 –
First I do not think "interpretation" in s 6(2)(a) is used in the technical lawyer's sense I have described. In my view it must be equally applicable to the situation of a layman who, taking the risk of advising himself as to the meaning of a document simply reads and thinks he understands it. It must be equally applicable to the layman who only reads a part of the document because he thinks he need not trouble with some of the more wordy clauses or the "fine print". It would seem strange to me if it were otherwise. Why should the prudent person who takes proper if mistaken advice, lose the benefit of the Act, while the foolish person who takes the risk on himself be protected? If I am correct up to this point what then of the layman who makes no attempt to read the document, but simply signs on the basis of a general description of the document, eg as in this case that it is a guarantee? I think that a signatory in that situation who assumes, because it is a guarantee and that it is for a particular purpose - in this case the raising of a specific loan - his liability thereunder must therefore be limited to that specific loan, is placing his own interpretation on the document however ill- formed and baseless it may be.
[60] In the present case Mr Cowan was mistaken as to the specific loans, sums and assets involved. Had he read the documents, he would not have misunderstood the meaning of the document.
The assignment of the contracts to MTF as a disposition of property not to be invalidated
[61] Ms Gudmanz identified a further bar to the relief which the defendants seek which, given my finding that there was no qualifying mistake, is not necessary to this decision. Had it been necessary I would have found against the defendants on this ground also. Briefly, it is as follows.
[62] Section 8 Contractual Mistakes Act provides:
8. Rights of third persons not affected
(1) Nothing in any order made under this Act shall invalidate—
(a)Any disposition of property by a party to a mistaken contract for valuable consideration; or
(b)Any disposition of property made by or through a person who became entitled to the property under a disposition to which paragraph (a) of this subsection applies—
if the person to whom the disposition was made was not a party to the mistaken contract and had not at the time of the disposition notice that the property was the subject of, or the whole or part of the consideration for, a mistaken contract and otherwise acts in good faith.
(2)Nothing in any order made under this Act shall affect the operation of subpart 5 of Part 2 of the Property Law Act 2007.
(3) In this section disposition means—
(a)any conveyance, transfer, assignment, settlement, delivery, payment, or other alienation of property, whether at law or in equity:
(b) the creation of a trust:
(c)the grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property, whether at law or in equity:
(d)the release, discharge, surrender, forfeiture, or abandonment, at law or in equity, of any debt, contract, or thing in action, or of any right, power, estate, or interest in or over any property; and for this purpose a debt, or any other right, estate, or interest, shall be deemed to have been released or surrendered when it has become irrecoverable or unenforceable by action through the lapse of time:
(e)the exercise of a general power of appointment in favour of any person other than the donee of the power:
(f)any transaction entered into by any person with intent thereby to diminish, directly or indirectly, the value of that person's own estate and to increase the value of the estate of any other person.
[63] In this case the four contracts were assigned to MTF for valuable consideration. There is no evidence to suggest that at the time of assignment MTF had any knowledge of a mistake or that MTF acted other than in good faith. When Global Credit assigned the four contracts to MTF, that was a “disposition” of property within the definition in s 8(3)(a) Contractual Mistakes Act.
[64] I recognise that there is a powerful argument that, under s 8(1) Contractual Mistakes Act, no orders to be made under that Act could invalidate the package of the contractual rights which Global Credit assigned to MTF. Given, however, that the defendants’ contractual mistakes argument fails for other reasons, I refrain from determining whether the fact that the Court is not to invalidate the assignment of those rights means that the Court under the Contractual Mistakes Act has no discretion to grant relief by way of variation under s 7 of the Act.
[65] Ms Gudmanz further submitted that were the defendants to establish a qualifying mistake under the Contractual Mistakes Act, they would have no arguable case for the exercise of the s 7(3) discretion in favour of relief. Ms Gudmanz noted particularly the provisions of s 7(2) of the Act which provides:
7 Nature of relief
…
(2)The extent to which the party seeking relief, or the party through or under whom relief is sought, as the case may require, caused the mistake shall be one of the considerations to be taken into account by the Court in deciding whether to grant relief under this section.
[66] Ms Gudmanz submitted that Mr Cowan’s responsibility for the creation of any qualifying mistake on his part – by completely failing to read the contracts – was so substantial as to disqualify the defendants from any entitlement to relief. Again, having regard to my primary finding in relation to the defendants’ pleading under the Contractual Mistakes Act, it is unnecessary that I determine whether the defendants’ conduct in bringing about their own mistake should inarguably cut across the exercise of any discretion under s 7 Contractual Mistakes Act. Having regard to the gross nature of the defendants’ negligence I might well have concluded, if necessary, that relief was inarguably unavailable in this case.
Conclusions
[67] The plaintiff is entitled to summary judgment. The terms of the contracts relied upon and the calculations of indebtedness are not in dispute. The defendants have no arguable case, whether based on agency or otherwise, for invoking the doctrine of non est factum. They do not have an arguable case of qualifying mistake under the Contractual Mistakes Act. The allegations of fraud made against Mr Whelan do not provide an arguable ground for denying the plaintiff its contractual rights to recover payment of the loans and associated interest.
[68] In the Bradley West case Tipping J said, at p 122, in relation to the facts of that case:
In the present case the purchasers trusted their solicitor. They were signing a number of documents. They believed that the documents were necessary to implement the transaction upon which they were engaged. In such a case the law has to choose whether to allow a plea of non est factum with the potential downstream injustice to those relying on the document, or to take the view that if the signatory has a complaint the complaint lies against the solicitor or other trusted adviser. In my judgment it is much better in such circumstances to disallow the plea of non est factum and leave the signatory to whatever redress may be available against the solicitor than to put in jeopardy the efficacy of an apparently binding document.
[69] While His Honour’s observations were made solely in relation to the plea of non est factum and the defendants’ trust in that case was placed in a solicitor, the observations are equally pertinent and cogent to the present case. The defendants in the Bradley West case said they trusted the accuracy of what their solicitor told them.
Mr Cowan in this case says he trusted the accuracy of what Mr Whelan told him. It is appropriate that Mr Cowan pursues his redress as against Mr Whelan (and his company) rather than have the Court put in jeopardy the efficacy of the apparently binding contracts that were assigned to MTF.
Orders - summary judgment application
[70] I order that the Markline Credit Contract dated 26 January 2007 and the Scorpion Credit Contract dated 26 January 2007 be rectified by replacing references to “Bentstick St Limited” with the word “Bentinck St Limited”.
[71] I further order that there be judgment for the plaintiff against the first and second defendants jointly and severally in the following sums in relation to the following contracts:
The Markline Credit Contract
(a) Principal $ 91,716.25 (b) Interest from 12 October 2009 to date of judgment (231 days) $ 14,511.42
The Scorpion Credit Contract
(a) Principal $ 91,716.26 (b) Interest from 12 October 2009 to date of judgment (231 days) $ 14,511.42
Stabicraft Credit Contract
(a) Principal $244,244.55 (b) Interest from 12 October 2009 to date of judgment (231 days) $ 38,643.99
Maxim Credit Contract
(a) Principal $ 85,206.13 (b) Interest from 12 October 2009 to date of judgment (231 days) $ 13,481.16
Orders – change of venue application
[72] The defendants made application for change of venue, opposed by the plaintiff. Given the orders I have made, it is inappropriate to consider that application further. I dismiss it.
Costs
[73] Costs must follow the event.
[74] The plaintiff in relation to each contract is expressly entitled to recover costs incurred as a result default upon a solicitor/client basis.
[75] I reserve the quantification of costs.
[76] Counsel are to confer with a view to agreeing the quantum of costs. In the event of disagreement I direct:
a. The plaintiff is to file and serve within ten working days of this judgment an affidavit detailing its costs and disbursements, attaching all relevant fee notes, and providing such information (whether in the form of work in progress records or similar) as will enable the Court and the defendants to ascertain the reasonableness of the solicitor/client fees.
b.At the same time counsel for the plaintiff is to file and serve, if she chooses, a memorandum making any submissions as to the quantum (limited to three pages).
c. The defendants are to file and serve within five working days after service of the plaintiff’s documents any evidence in response and any submissions in response (limited to three pages).
[77] Unless either counsel requests a hearing by telephone conference, the Court will then determine the quantum of costs on the papers.
Injunctive relief
[78] By its statement of claim the plaintiff sought mandatory injunctions requiring the defendants to deliver up the four boats referred to in the four contracts. Submissions were not addressed to the Court in relation to the injunctions. There is a reasonably clear implication from the evidence filed that Global Credit did not in fact sell or transfer the four boats to the defendants. In any event, on the evidence the plaintiff would not be entitled to a summary judgment in relation to the mandatory injunctions it seeks. Any such orders would need to be made by a Judge of this Court at trial. It may be that the plaintiff upon reflection formally withdraws this aspect of the claims.
[79] I reserve the issue as to the injunctions sought.
[80] Counsel for the plaintiff is to file and serve a memorandum within ten working days advising whether the plaintiff withdraws the claims for injunctions.
Solicitors:
Gallaway Cook Allan, Dunedin
Wilson McKay, Auckland
0
0
0