New Zealand Bloodstock Finance Limited v Diamond Stud Limited HC Auckland CIV 2009-404-6900
[2010] NZHC 545
•23 April 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2009-404-006900
BETWEEN NEW ZEALAND BLOODSTOCK
FINANCE LIMITED
Plaintiff
AND DIAMOND STUD LIMITED
First Defendant
AND HA, DUONG HAI
Second Defendant
Hearing: 20 April 2010
Counsel: J G Collinge for plaintiff
S R Judd for defendants
Judgment: 23 April 2010 at 4:30pm
JUDGMENT OF ASSOCIATE JUDGE ABBOTT
This judgment was delivered by me on 23 April 2010 at 4:30pm,
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
J G Collinge, Barrister and Solicitor, 10 London Street, St Marys Bay, Auckland 1011 for plaintiff Oranga Law, PO Box 12103, Penrose, Auckland 1642 for defendants
NEW ZEALAND BLOODSTOCK FINANCE LIMITED V DIAMOND STUD LIMITED & ANOR HC AK CIV 2009-404-006900 23 April 2010
[ 1 ] This proceeding concerns a dispute over the sum owing to the plaintiff New
Zealand Bloodstock Finance Limited (NZB Finance) under two contracts to provide finance to the first defendant Diamond Stud Limited for the purchase and maintenance of bloodstock. The second defendant (Mr Ha) is the sole director and shareholder of Diamond Stud and guaranteed its obligations under the contracts.
Diamond Stud used the facilities to purchase bloodstock in mid 2007. It subsequently entered several of them into the national yearling sales conducted by New Zealand Bloodstock Limited (NZ Bloodstock), a company related to NZB Finance, in January 2008. NZ Bloodstock understood that two of the horses were purchased at the auction by persons bidding on behalf of Diamond Stud. It issued credit notes and invoices to Diamond Stud on that basis and accounted to NZB Finance for the net balance (including the proceeds of sale of two other horses).
The loan facilities were repayable on demand. NZB Finance made demand and issued this proceeding, including the application for summary judgment, when Diamond Stud failed to pay. Diamond Stud has opposed summary judgment. It says that NZ Bloodstock should not have debited it with the sale price of the two horses which NZ Bloodstock says were bought at the auction on its behalf. It also contends that NZ Bloodstock should not have deducted commission for that sale.
The central issue is whether the persons who purchased the two horses at the 2008 yearling sales did so as agent for Diamond Stud. It is still necessary to decide whether this question of agency can be resolved in a summary way. If it cannot, the court has also to determine whether NZB Finance is entitled to judgment in any event for the balance of the sum due under the facilities (leaving aside the sum in dispute in respect of the two horses).
Background
NZB Finance provides finance to persons in the bloodstock industry. Diamond
Stud is a dealer in bloodstock.
On 27 June 2007 Diamond Stud entered into two agreements (called contracts
for current advances) with NZB Finance for the provision of loan facilities for the purchase of specified bloodstock:
a)A facility for advances up to $1,700,000 (the first facility) for purchase of six horses including a bay colt by Zabeel out of Myself (which I will refer to as the Zabeel colt), and a bay filly by Redoute’s Choice out of Donna Dior (which I will refer to as the Redoute filly);
b)A facility for up to $950,000 (the second facility) for the purchase of a chestnut mare “Honor Lap”.
Mr Ha signed both contracts as guarantor of Diamond Stud’s obligations.
Diamond Stud used the facilities to purchase the bloodstock in June and July
2007. It subsequently entered some of the horses, including the Zabeel colt and the Redoute filly, into the annual sale conducted by NZ Bloodstock in January 2008.
On 28 January 2008 the Redoute filly was sold at auction for $540,000 on a bid
by a registered buyer, Stephen McKee. After the sale Mr McKee signed NZ Bloodstock’s standard acknowledgment of purchase form.
[10] On 29 January 2008 Diamond Stud sold the Zabeel colt for $420,000, to another registered buyer, Graeme Rogerson. Following the sale, the standard acknowledgment of purchase was signed by Murray Gregory, an employee of Mr Rogerson.
[ 11 ] Although the acknowledgments of purchase stated that the purchases were to be invoiced to Mr McKee and Mr Gregory respectively, NZ Bloodstock received instructions to invoice the sale to Diamond Stud and deliver the horses to Diamond Stud’s premises. The horses were delivered in accordance with those instructions on the respective days of sale. NZ Bloodstock issued credit advice (for the sale) and an invoice (for the purchase) to Diamond Stud in respect of each sale. It also issued a credit advice to Diamond Stud for the sale of the other two horses.
[ 12] NZ Bloodstock transferred the net proceeds of sale from the January sales to NZB Finance. They were credited against the sum owing under the first facility (which had been used to purchase these horses) on 1 April 2008. NZB Finance and NZ Bloodstock are subsidiaries of NZ Bloodstock Holdings Limited. Counsel for NZB Finance accepted that they should be treated as a single entity for the purpose of this application.
[13] In August 2008 Diamond Stud entered the Zabeel colt into NZ Bloodstock’s 2008 Ready to Run Sale to be held in mid November 2008. It appears that it did not sell. It was subsequently diagnosed to be a “grade 5 Whistler” and was sold for a nominal value only. NZB Finance did not receive any of those nominal sale proceeds.
[ 14] The Redoute filly was eventually sold at NZ Bloodstock’s Karaka Mixed Sale on 2 August 2009. The proceeds of sale were passed to NZB Finance and credited to Diamond Stud’s outstanding account under the first facility.
[15] In an affidavit filed in support of the application NZB Finance‘s finance manager, Ian Gwyn, says that NZB Finance made repeated demands on the defendants to pay the amounts owing under the two facilities but received no response.
[ 16] On 22 August 2009 NZB Finance’s solicitor wrote to the defendants formally requesting payment of the amount then outstanding under the first facility and advised that he had instructions to take legal proceedings for the recovery of that sum if he did not hear from them by 28 August 2009. On 27 August 2009 the solicitor sent an email to Mr Ha, stating that he also had proceedings to recover the amount owing under the second facility (relating to the mare Honor Lap.
[ 17] In between these communications, Mr Gwyn contacted Mr Ha by email and informed him that legal proceedings were to commence. Mr Ha responded that matters were outside of his control given the state of the world finance market. He offered to meet later in the week if it was not too late, but added:
“Otherwise do what you need to do.”
[18] NZB Finance issued this proceeding on 20 October 2009 seeking summary judgment for $2,364,714.40, as the mount outstanding under the two facilities as at 30 September 2009.
[ 19] The defendants filed notice of opposition to the application for summary judgment on 25 November 2009. They contended that instead of crediting Diamond Stud with the proceeds of sale (less commission) for the Redoute filly and the Zabeel colt in January 2008, NZ Bloodstock had wrongly debited it with the purchase price and some related expenses (totalling $1,014,468.75). They also said that it was unconscionable to charge commission at the same time as disadvantaging Diamond Stud by improperly debiting the purchase price. They claimed a set-off or counterclaim against NZB Finance in respect of NZ Bloodstock’s actions and sought a stay of the application or the proceeding pending determination of the counterclaim in respect of the incorrect debit.
[20] Mr Ha gave an affidavit in support of the notices of opposition in which he acknowledged that he received statements of account from NZ Bloodstock in respect of the January sales on 25 February 2008. He said he disputed the debits shown on the statements in respect of the Redoute filly ($540,112.50) and the Zabeel colt ($474,468.75). He added that he could not locate his copies of the “acknowledgment of purchase” in respect of those sales, but that they would record the sales and the purchaser’s signature. It is not in dispute that this is the first time that the defendants challenged the accounting provided by NZ Bloodstock in respect of the sale, and the amount owing to NZB Finance under the two agreements.
Admissibility of further affidavits
[21 ] At the time of the first call of this application on 1 December 2009, three affidavits had been filed: Mr Gwyn’s affidavit in support of the application; Mr Ha’s affidavit in support of his notice of opposition; and an affidavit by Mr Gwyn in reply to Mr Ha’s affidavit.
[22] On 1 December 2009 counsel for the defendants sought and was given leave to file a further affidavit in rebuttal of matters in Mr Gwyn’s affidavit in reply, but
reserving to NZB Finance the right to object to that affidavit at the substantive hearing. Mr Ha filed a further affidavit on 8 December 2009 exhibiting a copy of NZ Bloodstock’s standard conditions of sale (I note that although Mr Ha described them as having come from NZ Bloodstock’s catalogue for its “Premier Sales 2008”, they are stated to be conditions of sale for its 2007 Ready to Run Sale, and they were taken to be the applicable terms for the January 2008 Sales). In addition, in the narration of his affidavit, Mr Ha states that “Diamond Stud Limited did not purchase for itself” the Redoute filly or the Zabeel colt.
[23] Subsequently, NZB Finance filed four further affidavits in response to Mr Ha’s affidavit of 8 December 2009. They were directed to Mr Ha’s statement that Diamond Stud did not purchase the two horses for itself:
a)Mr Gwyn produced various documents which disclosed actions taken by Diamond Stud or Mr Ha in relation to the two horses between January 2008 and August 2009, which he said were consistent with Diamond Stud’s ownership of the horses. He also produced NZ Bloodstock’s credit advice in respect of the sales of the two horses in January 2008 (which he said he been inadvertently omitted from his affidavit in reply).
b)Mr McKee, Mr Rogerson and Mr Gregory provided brief affidavits, the tenor of which is that Mr Ha approached Mr McKee and Mr Rogerson and arranged for them to bid for the horses on Diamond Stud’s behalf. Mr McKee says that he has not had any dealings with the Redoute filly since that day and did not receive any of the proceeds of sale when it was subsequently sold. Mr Rogerson says that he subsequently attempted (unsuccessfully) to syndicate the horse for Diamond Stud at the auction price but apart from that has had no dealings with it since the auction.
[24] Counsel for the defendants sought an order that the four further affidavits filed
by NZB Finance not be read. He submitted that Mr Ha had done no more than
produce NZ Bloodstock’s standard terms of sale, which had been referred to
Mr Gwyn’s reply affidavit. He said that further evidence addressed discussions with Mr Ha which should have been produced in reply. He submitted that Mr Ha had raised the point as to whether the horses were bought for Diamond Stud in his first affidavit, by challenging NZ Bloodstock’s entitlement to debit the purchase price, and that Mr Gwyn had responded to it in his affidavit in reply by referring to NZ Bloodstock’s “understanding” that Diamond Stud was the purchaser.
Counsel for NZ Bloodstock submitted that Mr Ha’s affidavit did raise a new matter (namely that the bidders and not Diamond Stud were liable for), and the further affidavits intended to establish that Diamond Stud was the undisclosed principal at the sales, and should be allowed in the interests of justice: Nelson Lifecare Centre Limited v Sampson.[1]
[1] Nelson Lifecare Centre Ltd v Sampson (1995) 8 PRNZ 376.
The critical issue in this case is whether Diamond Stud is liable to meet the purchase price of the Redoute filly and Zabeel colt under the bids at the January 2008 Yearling Sales. This depends on whether it was an undisclosed principal for Mr McKee and Mr Rogerson at that time. Although there is some merit in the argument that this was put in issue by the defendants’ notices of opposition, the point only emerged clearly when Mr Ha expressly denied that the horses were bought on Diamond Stud’s behalf in his rebuttal affidavit. I considered whether to order that all rebuttal affidavits were not to be read. However, as the evidence is so relevant to the critical issue in the dispute, and to the application for summary judgment, I gave leave to NZB Finance to file the late affidavits, but on the basis that the weight to be attached to that evidence would have to be assessed in light of the dispute over that evidence.
The principles to be applied
NZB Finance seeks summary judgment under r 12.2(1). Under that rule the court may give judgment if NZB Finance satisfies it that the defendants have no defence to their cause of action or any particular part of it.
[28] The principles that the court applies when determining an application of summary judgment are well established. They can be found in the early leading cases of Pemberton v Chappell[2] and Bilbie Dymock Corp Ltd v Patel.[3] (An updated review of the principles can be found in Jowada Holdings Limited v Cullen Investments Limited.[4]) Principles of particular relevance to the present application are:
a)The onus is on a plaintiff seeking summary judgment to show that there is no arguable defence: the court must be left without any real doubt or uncertainty in the matter;
b)The court will not hesitate to decide questions of law where appropriate;
c)Where a plaintiff makes out a prima facie case, the defendant must show an evidential basis for assertions which could provide a tenable defence (they must pass “the threshold of credibility);[5]
d)The court will not attempt to resolve genuine conflicts of evidence on material facts, or to assess the credibility of a statement said to give rise to a dispute of fact, provided there is a plausible basis for it:
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to 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. [6]
e)The Court must balance caution in avoiding any prejudice to a defendant against a robust and realistic attitude where required by the facts of the case..).
Has NZB Finance established that Diamond Stud was the undisclosed principal?
[2] Pemberton v Chappell [1987] 1 NZLR 1
[3] Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[4] Jowada Holdings Ltd v Cullen Investments Ltd CA248/02, 5 June 2003.
[5] Reeves v One World Challenge LLC [2006] 2 NZLR 184 at 199 (CA
[6] Eng Mee Yong v Letchumanan [ 1980] AC 331(PC) at 341.
There is no dispute that the two facilities are due for repayment, or generally that the sums claimed are due. The sole dispute is whether NZ Bloodstock was entitled to debit the sum of $1,014,581.20 to Diamond Stud’s account in respect of the first facility, on 1 April 2008. The defendants say that NZ Bloodstock was not entitled to do so because Diamond Stud was not the purchaser. The issue for the present application is whether the defendants have an arguable case for contending that Diamond Stud was not the undisclosed principal on the auction contracts.
There are two matters to consider in relation to NZB Finance’s evidence as to Diamond Stud’s being the undisclosed principal. The first is whether the evidence is admissible. The second is whether the court can make a determination on that evidence, or whether there are material disputes of fact or there is a need for further investigation, that cannot be resolved and that make the case unsuitable for summary judgment.
Opposing arguments
Counsel for the defendants submitted that it was not open to NZB Finance to adduce any evidence that Diamond Stud was the principal because on the true construction of the sale contracts these were sales to Mr McKee and Mr Rogerson, and parol evidence cannot be called to contradict the written terms of the agreement. He relied on a long-standing line of authority dating from the mid-nineteenth century and endorsed by New Zealand’s courts.[7]
[7] Laws of New Zealand Agency at [137]; Humble v Hunter (1848) 12 QB 310; Smith v Holroyd [1922] NZLR 256; Fawcett v Star Car Sales Ltd [1960] NZLR 406 (CA); and Murphy v Rae [1967] NZLR 103.
Counsel submitted that the matter turned on the interpretation of the written terms of the auction contracts to be found in NZ Bloodstock’s conditions of entry into the auction, its standard conditions of sale at auction, and the acknowledgments of purchase. Counsel referred to identical or near identical clauses in the conditions of
entry and the standard conditions of sale which precluded a vendor bidding (in person or through an agent) on any horse he or she had entered into the sale, other than through the auctioneer. He also referred to provisions as to agency in the standard conditions of sale, including a provision that unless prior written evidence of appointment as agent was lodged prior to the auction, each bidder was deemed to be bidding as principal party and, notwithstanding any subsequent disclosure, was to be responsible for the purchase price. A form of appointment of agent was attached to the conditions of sale. He noted that other terms required the purchaser to sign the acknowledgment of purchase and pay the auction price within 60 minutes of the fall of the hammer. He argued that in the absence of a disclosure of agency these provisions placed an obligation on NZ Bloodstock to recover the purchase price from the bidder.
Counsel argued that, on a proper interpretation of these terms, any bidder who had not completed the appointment form was intended to be contracting as principal. He submitted that when read with the unqualified signature on the acknowledgment of purchase, the proper construction of the agreement was that Mr McKee and Mr Rogerson had contracted as principal. He submitted that NZ Bloodstock’s evidence as to its understanding that Diamond Stud was the undisclosed principal contradicted these terms, and had to be excluded.
Counsel for NZB Finance accepted the principles relied on the defendants, but submitted that they had no application to the facts of this case. He argued that part of evidence as to Diamond Stud being the undisclosed principal would be excluded only if Mr McKee and Mr Rogerson had contracted clearly as purchasers in their own right (in which case evidence to the contrary would be precluded by the terms of the contract). He submitted that the terms were ambiguous at best. He referred to the detail of the acknowledgments of purchase and pointed out that there was no statement to the effect that Mr McKee and Mr Rogerson were bidding in their own right. He said that this fact alone distinguished this case from the cases relied on by the defendants where parties entered into agreements as “owner” or made specific assertions as to title. He submitted that it was well established law that parol evidence could be called to establish the identity of an undisclosed principal.
As to the conditions of sale relied on by the defendants, counsel submitted that the bidding rules similarly did not amount to the clear expression of ownership required for the rule in Humble v Hunter, and the provisions as to agency merely restated the law (particularly as to undisclosed principals). None of these provisions precluded the right of NZB Finance to sue an undisclosed principal after the agency was disclosed. He said that the requirement for completion of the agency instruction form attached to the conditions of sale was for administrative convenience and did not have any greater contractual significance.
Discussion
As a general rule an undisclosed principal may sue or be sued on a contract made by the agent. An agent who contracts in his or her own name without disclosing the agency is also liable, but that liability is in addition to, and not in substitution for, that of the undisclosed principal. The general rule applies unless the terms of the contract or surrounding circumstances indicate that the agent only is to be bound .[8]
[8] Laws of New Zealand , Agency at [137]
The defendants’ contention that NZB Finance’s evidence as to Diamond Stud being the undisclosed principal is inadmissible is based on the line of cases emanating from the early authority (1848) of Humble v Hunter. In that case the son of the owner of a ship signed a charter party as her agent. The agreement described the son as the owner. The court ruled that the son’s evidence that he signed the charter party as agent was inadmissible because the son, by describing himself as owner, had contracted as principal. That case was referred to in Smith v Holroyd where Mr Holroyd, as registered owner, entered into an agreement for sale of a house. When the purchaser brought an action for specific performance Mr Holroyd claimed that he made the contract as agent for a co-defendant who was equitable owner of the property under a prior agreement for sale. The court ruled that evidence that Mr Holroyd was acting as agent for an undisclosed principal was inadmissible as it would contradict the written contract, which the court construed as a contract by Mr Holroyd as principal
and owner for the sale of his own property. The principle was referred to, and accepted as good law, by Gresson P in a dissenting judgment in the Court of Appeal in Fawcett v Star Car Sales Ltd (it was decided on other grounds).
The principle in Humble v Hunter was reviewed by this court in Murphy v Rae, where the plaintiffs were suing for breach of an agreement for sale and purchase of a house property. The plaintiffs were husband and wife. The purchaser sought to defend the claim on the basis that the agreement was signed by Mr Murphy only. Mr Murphy said that he was acting both for himself and as agent for his wife (an undisclosed principal). Counsel for the defendant submitted that the evidence of both Mr and Mrs Murphy as to agency was inadmissible because he had acted as if he was the real and only principal.
The court reviewed authorities commencing with Humble v Hunter, including Fawcett v Star Car Sales Ltd. The court referred to a decision of Viscount Haldane in Fred. Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic.[9] involving a claim under a charter party where objection was taken to the admission of evidence that the plaintiffs were the undisclosed principals of the person signing the charter party as charterer. In a passage adopted by Gresson P in Fawcett v Star Car Sales Ltd, Viscount Haldane stated (at 206):
It was held in Humble v Hunter that where a charterer dealt with someone described as the owner, evidence was not admissible to show that some other person was the owner. That is perfectly intelligible. The question is not before us now, but I see no reason to question that where you have the description of a person as the owner of property, and it is a term of the contract that he should contract as owner of that property, you cannot show that another person is the real owner. This is not a question of agency – that is a question of property.
[9] Fred. Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic [1919] AC 203 HL.
In Murphy v Rae, Muller J summarised the position in New Zealand as a consequence of this line of authority in the following terms (at 109):
For myself I feel bound to hold that Humble v Hunter is still good law, but that the principle derived from it is applicable only to cases falling strictly within the words of Lord Haldane quoted by Gresson P. in the extract from the latter’s judgment in Fawcett’s case set out above; that is to say, where a person
is described in a written contract as the “owner” or “proprietor” of property, and where it is a term of the contract that he should contract as “owner” or “proprietor” of that property. Moreover, I think that the principle is to be applied only when a full consideration of the whole contract brings it clearly within that area.
[41 ] I start with a consideration of the written terms. I have already referred to counsel’s reliance on the fact that Mr McKee and Mr Rogerson signed NZ Bloodstock’s standard form acknowledgment of purchase. He also relied on a clause in the acknowledgment importing the terms of sale:
SALE CONDITIONS
I hereby acknowledge purchase of the above horse which is more fully described in the catalogue pertaining to the above sale & acknowledge that I am familiar with, and agree to be bound by, the Conditions of Sale as printed in the catalogue, that I bid for the said horse subject to the terms of the said Conditions of Sale, and the confirmation of purchase is subject to those conditions.
The form has a space for “agent/press details” alongside a space for the name of the person to whom the purchase was to be invoiced. Below the section dealing with agent/press details is a note “Agent retains obligations of Principal as per Clause 9 of Conditions of Sale”.
[42] Clause 16 of the conditions of entry (under the head “Bidding”) and clause 3 of the conditions of sale (being one of several clauses under the heading “Conduct of sale”) prohibit a vendor from bidding at a sale of his or her own lot. The material parts read:
The Auctioneer shall have the right to bid as agent on behalf of the Vendor on any Lot on which a reserve price has been placed up to that reserve. No Vendor shall in any circumstances whatsoever bid or allow any agent or other person to bid on his behalf for any Lot owned by such Vendor except that this restriction shall not extend to partners, syndicate owners or other joint owners. Any partner, syndicate member, or other joint owner may bid thereon either personally or through an agent. Notwithstanding any permission in this clause should any improper bidding either by or on behalf of the Vendor or part owner be discovered, full commission will be charged on any horse bought in and should there be any improper bidding either by or on behalf of a Vendor or part owner which results in the sale and purchase of a Lot being rescinded, the Vendor shall accept the return of the Lot, and in the event of the Auctioneer suffering any loss as a result of such improper bidding the Vendor shall fully indemnify the Auctioneer for all costs and expenses incurred by the Auctioneer in relation thereto
[43] Clause 20 of the conditions of entry and clauses 8 to 11 of the conditions of sale, both deal with agency. Counsel for the defendants placed particular reliance on the following clauses in the conditions of sale:
AGENCY
9 SUBJECT to a bidder expressly satisfying the conditions specified in
clause 10 each bidder shall be deemed, as between the Vendor, the Auctioneer and such bidder, to bid as principal party, and accordingly, notwithstanding any subsequent disclosure of agency, shall be and remain responsible for the payment of the purchase price of any Lot or Lots in respect of which he is the highest bidder.
10 WHERE the bidder has lodged with the Auctioneer, prior to the
auction taking place, written evidence of that bidder’s appointment as agent for another party, and where the Auctioneer has given approval for the bidder to bid in that capacity, such bidder shall not be held responsible by the Auctioneer for the payment of the purchase price of any Lot or Lots in respect of which he, as agent for the approved principal party, is the highest bidder, unless the agent has breached or exceed the terms of the actual or apparent authority given to him by his principal.
[44] I have already referred to the form for appointment of an agent which was attached to the conditions. Counsel referred in particular the following passage at the foot of the form:
If you bid on behalf of another party then Clause 10 is important to read and understand. If you bid and don’t comply with the conditions in Clause 10, you will be liable for payment. Approval of your agency can only be given by management at New Zealand Bloodstock Ltd. As an agent, if you breach the terms of your agreement, you may be liable for the purchase.
[45] This case does not fit easily into the line of cases starting with Humble v Hunter. After considering the written terms of the agreements in each case (the conditions of entry to the sale, the conditions of sale themselves and the acknowledgment of purchase), I am not persuaded that the parties, by these terms, intended to limit NZ Bloodstock to recovering the purchase price exclusively from Mr McKee and Mr Rogerson or to preclude it from pursuing an undisclosed principal for the unpaid purchase price:
a) I accept the submission of counsel for NZB Finance that the
acknowledgment of purchase is ambiguous at best. Both persons
signed under the words “signature of purchaser or agent” without clarifying which capacity. However, in each form the word “same” was written in the section for “agent/press details”, alongside where Mr McKee and Mr Rogerson were named under the heading “purchase to be invoiced to”.b)I accept that Mr McKee and Mr Rogerson accepted that the terms as to bidding/conduct of sale applied, and that those terms prohibited a vendor from bidding through an agent other than the auctioneer. However, the clauses also provide for consequences if the prohibition is not heeded. They do not restrict liability for the purchase price to the bidder. To the contrary, they specifically provide for the (true) vendor to retake the horse if the sale is rescinded.
c)I do not read the clauses on agency as requiring a different construction or imposing obligations in addition to those imposed by common law. My view might have been different if clause 9 had stipulated that the bidder had sole responsibility for the purchase price (in which case it would have varied the position at common law), but it does not say that.
I find that the description of Mr McKee and Mr Rogerson as “purchaser or agent” coupled with the prohibition in the standard terms on a vendor bidding on his own lot do not meet the criteria for the application of the principle in Humble v Hunter as identified in the passage quoted above from Murphy v Rae. Accordingly, I find that NZB Finance is able to give parol evidence to establish the undisclosed principal.
That brings me to the second aspect, namely whether there is sufficient undisputed evidence to establish for summary judgment that Diamond Stud was the undisclosed principal.
Counsel for the defendants submitted that there was a clear dispute as to whether Mr McKee and Mr Rogerson bought the horses on Diamond Stud’s behalf, which the court could not, and should not attempt to, resolve in this application. He submitted that NZB Finance’s initial evidence as to its “understanding” that Diamond Stud was the principal for the bids was vague, and the defendants ought to have opportunity to investigate (by cross-examination at trial) the allegations made in the late affidavits. He pointed out that there was no evidence of the source of the instructions as to invoicing and delivery nor as to any other basis for NZ Bloodstock’s understanding following the sales that Diamond Stud was the purchaser.
I accept that, by itself, the undisputed evidence that NZ Bloodstock was given instructions after the sale to invoice Diamond Stud and deliver the horses to it, is not necessarily evidence that it was the principal (although the contrary contention seems highly improbable given that both Mr McKee and Mr Rogerson had their own racing stables to which the horses could have gone). However, the evidence becomes even more improbable when taken into account with the fact that the defendants did not contest or even question NZ Bloodstock’s accounting, which clearly showed that the sales were invoiced to Diamond Stud, and allowed for in the proceeds of sale transferred to NZB Finance for credit against the outstanding loan facility.
Mr Ha has acknowledged that he received accounting information recording the debiting of the sale proceeds in February 2008. Mr Gwyn says that the defendants were given accounts on a monthly basis thereafter. Mr Ha does not explain why he took no steps to dispute the debit until served with this proceeding. Although he does not advance this as an explanation, it is not credible that he could not have been aware of a debit in the order of $1,000,000. The exchange of emails with Mr Gwyn in August 2009 is also instructive. Rather than challenging Mr Gwyn about NZB Finance’s intention to issue this proceeding Mr Ha simply says that the matter is out of his control.
Counsel for the defendants commented in his oral submissions that the vagueness of NZB Finance‘s evidence as to its understanding of Diamond Stud’s position post-auction left open the possibility that NZ Bloodstock knew of it before the auction but chose not to enforce its own rules, and that this was a matter that the defendants should be entitled to investigate. I do not accept that. There is no evidence at all to suggest any prior knowledge.
The evidence of Diamond Stud’s later actions in respect of these horses is also consistent with Diamond Stud’s ownership. It entered the Zabeel colt into the 2008
Ready to Run Sales, and Mr Ha signed an entry form for that sale. Although the entry form is equivocal as to whether it was signed as owner or agent for the owner, Mr Rogerson has given evidence that his stables have never appointed Diamond Stud as its agent for the sale of the horse.
NZB Finance has also produced evidence of expenses incurred by Diamond Stud or Mr Ha in respect of the Redoute filly from November 2008 to August 2009 (including training, agistment, and preparation for sale). The horse was sold and the proceeds for sale have been credited to Diamond Stud. Mr McKee has given evidence that he has not had any dealings with the horse since the day of the auction.
Although Mr Ha has not had opportunity to respond to this evidence of subsequent actions, he has not made any mention of any ongoing association with the horses.
When all of these facts are taken into account, Mr Ha’s assertion that Diamond Stud did not purchase the horses for itself lacks credibility. It is inconsistent with clear and undisputed facts, particularly with delivery of the horses to Diamond Stud, invoicing of the sales to it, and the defendants’ failure to challenge the debiting of the purchase price. Although I accept that the evidence of Mr McKee and Mr Rogerson as to their discussions with Mr Ha on the day of sale is disputed, I do not need to resolve that dispute. There is sufficient other undisputed evidence to satisfy me that Mr McKee and Mr Rogerson were acting on behalf of Diamond Stud as their undisclosed principal.
Counsel for the defendants raised the fact that NZ Bloodstock could have rescinded the contracts after it had formed its understanding of Diamond Stud’s position as undisclosed principal, but chose not to do so and has failed to pursue Mr McKee and Mr Rogerson separately or as well as the defendants. The short answer to these points is that neither it nor NZB Finance is obliged to do so. A party dealing with an agent for an undisclosed principal may elect whether to sue the undisclosed principal or the agent (or both): L C Fowler & Sons Ltd v St Stephens College Board of Governors.[10] NZ Bloodstock was not obliged to act on what appears to have been a breach of the conditions of sale (as Diamond Stud was purchasing, there were no third party rights which, as auctioneer, it needed to safeguard).
[10] L C Fowler & Sons Ltd v St Stephens College Board of Governors [1991 ] 3 NZLR 304.
Counsel for the defendants raised two other matters which I shall address briefly. The first was that NZB Finance should not have accepted NZ Bloodstock’s decision to debit the purchase price to Diamond Stud. He submitted that this was not permitted by the conditions of sale. There is nothing in this point. Clause 44 of the conditions of sale gives NZ Bloodstock the right to appropriate money received and apply it towards money owing to another subsidiary of NZ Bloodstock Holdings Limited. NZ Bloodstock and NZB Finance are both subsidiaries of NZ Bloodstock Holdings Limited.
The second matter is the defendants’ contention that the evidence of the rebuttal witnesses suggests that there is a common practice at NZ Bloodstock’s auctions for vendors to use undisclosed agents to bid for their own horses. I am not required to make any determination on this in this application. The point has relevance for the present application only insofar as it is a matter going to the credibility of the rebuttal witnesses. For the reasons I have already given I do not need to make that assessment. There is sufficient undisputed evidence on which to determine the application.
Other grounds raised in opposition
In their notices of opposition the defendants raised two further points. Although their counsel did not pursue them in his submissions I will address them briefly for completeness. First they said they had not been credited with the proceeds of sale of the two horses. It is clear from the evidence that they were although that was not immediately apparent because they were also debited with the purchase price. Secondly, they questioned NZ Bloodstock’s ability to charge commission. It is clear from clause 3 of the conditions of sale and clause 16 of the conditions of entry that there is no exclusion of the right to commission in the event of a buy back, even where the terms have been infringed by any improper bid.
Decision
For the reasons I have given I find that the defendants do not have arguable defences. I find that NZB Finance has established, by admissible parol evidence, that Diamond Stud was the undisclosed principal for the sales of the Redoute filly and Zabeel colt. I find that the defendants’ assertion that Mr McKee and Mr Rogerson did not buy the horses on its behalf lacks credibility in light of clear and undisputed evidence, and is inherently improbable. I do not accept that there are any disputes of material fact or further matters to investigate which make this matter inappropriate for determination by summary judgment.
NZB Finance is entitled to summary judgment against both defendants for the sum of $2,233,614.40, being the sum sought in its statement of claim less a credit of $131,000 for the proceeds of sale of a foal credited against the second facility since the proceeding was filed. NZB Finance is also entitled to interest on the outstanding balance from date of issue of this proceeding to date of judgment, at the rate prescribed under the contracts and on the judgment sum, at rates prescribed under the Judicature Act 1908.
NZB Finance is also entitled to its actual and reasonable costs in respect of this proceeding in accordance with clause 1 1 (b) of the contracts for current advances.
Associate Judge Abbott
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