Norris v McAllister HC Hamilton CIV 2009-419-1678
[2010] NZHC 1396
•16 August 2010
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV 2009-419-001678
BETWEEN DAVID RICHARD HERATA NORRIS AND CHRISTINE MOYLA CAVE Plaintiffs
ANDJAMES CAMPBELL MCALLISTER Defendant
(On memorandum) Counsel: J Niemand for plaintiffs
Minute: 16 August 201022 July 2010 at 2:35pm
MINUTE OF ASSOCIATE JUDGE FAIRE
1. I thank counsel for the plaintiff for his memorandum. The reference in my oral judgment to Mr Whanton is corrected so that it refers to Mr Wharton. The judgment is recalled and a new judgment with the correct spelling is now issued.
2. The judgment shall bear the date of 22 July 2010 as previously issued.
JA Faire
Associate Judge
Solicitors: Niemand Peebles Hoult, PO Box 1028, Hamilton for plaintiffs
And To: JC McAllister, 6 Landell Place, Hamilton, defendant
NORRIS V MCALLISTER HC HAM CIV 2009-419-001678 22 July 2010
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV 2009-419-001678
BETWEEN DAVID RICHARD HERATA NORRIS AND CHRISTINE MOYLA CAVE Plaintiffs
ANDJAMES CAMPBELL MCALLISTER Defendant
Hearing: 22 July 2010
Counsel: J Niemand for plaintiffs Appearance: JC Campbell, defendant in person Judgment: 22 July 2010 at 2.35pm
(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]
Solicitors: Niemand Peebles Hoult,PO Box 1028, Hamilton for plaintiffs
And To: JC McAllister, 6 Landell Place, Hamilton, defendant
2
Application
[1] The plaintiffs apply for summary judgment. They seek judgment for
$163,514.62 inclusive of interest, calculated to today’s date pursuant to a loan contract dated 19 February 2007.
The opposition
[2] Mr McAllister opposes the application and, in summary, advances the following matters:
a) The original loan offer did not proceed;
b)A new loan was made to the J3 Trust by the plaintiffs. It was not made to the J3 Partnership referred to in the loan offer. No guarantees were provided by him in respect of the new loan; and
c) In the alternative, the original loan contract was not a binding contract because it contemplated further contract documents being executed.
[3] Mr McAllister confirmed that the quantum figure sought was not in dispute. In short, the schedules that were produced to the court and counsel’s updated calculation of interest were accepted as correct calculations.
The court’s approach to a summary judgment application
[4] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence. In Krukziener v Hanover Finance Ltd[1] guidance was given as to how that position should be approached by the court when determining a summary judgment application. The court said:
[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187 at 26.
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried:
Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11
PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
Background
[5] In early 2007 the defendant discussed with the plaintiff, Mrs CM Cave, a house construction project at 231 Huia Road, Titirangi. The project was originally the concept of a Mr Vaughan Wharton.
[6] On 2 February 2007 the plaintiffs made a written loan offer which was addressed to the J3 Partnership. It described the borrower as the J3 Partnership. The defendant and Mr Wharton were described as guarantors.
[7] The loan offer was accepted on 19 February 2010. The defendant, Mr McAllister, signed on behalf of the J3 Partnership. Both Mr Wharton and Mr McAllister signed the documents in their capacity as guarantors as well.
[8] The plaintiffs produced a schedule which showed advances being made commencing on 15 February 2007 and through until 8 May 2008. The advances, which included capitalised costs and fees, totalled $336,625. The amount referred to in the loan agreement, being the amount of the loan facility, was $285,000.
[9] The project was unsuccessful. The subject matter of the project was sold. Mr Wharton was adjudicated a bankrupt on his own application on 10 February
2009.
[10] Mr McAllister, in his affidavits, confirmed that the structure by which the development was to be undertaken changed from what was originally contemplated
as a partnership of himself and Mr Wharton to a trust. The trustee of the trust was to be J3 Ltd as corporate trustee. That company was incorporated on 15 March 2007 and after some of the advances that I have referred to were actually made. J3 Ltd was placed into liquidation and Mr Kim Thompson was appointed its liquidator on
19 February 2010.
[11] Partial payments of the loans have been made. The first occurred on or about
9 October 2007 in the sum of $82,000. A direction as to the payment of that figure in reduction of the loan is confirmed by an email sent by Mr McAllister at that time.
[12] A further reduction in the loan was made on or about 23 February 2009 in the sum of $153,956.30. That payment was made from the net proceeds of sale of the property which was the subject of the construction project.
[13] The loan offer which was accepted made provision for further documentation as follows:
Documentation: Our document will be prepared by our solicitors and shall contain all such terms and conditions as are normally required or are specifically recommended by them. …
Acceptance: If the terms of this loan offer are acceptable, please acknowledge your acceptance to The Lender within three business days. We will instruct our solicitors to prepare the legal documentation. All costs of such preparation and registration are for your account.
Our loan will be made when all the documents have been executed and all the conditions outlined in this letter have been completed to our Solicitor’s satisfaction.
[14] It is common ground that no formal loan documentation along the lines referred to the loan offer and acceptance document was ever prepared. What happened is that advances were made when requests for advances were made by Mr McAllister. I shall not detail them in this judgment. Suffice to say, there was placed before me, both in the form of exhibits to affidavits and in attachments to submissions, a series of requests for drawdown of the loan moneys. Mr McAllister
drew attention to the fact that certainly from March 2007 the requests included requests for payments to be made to an account in the name of J3 Ltd.
The grounds in opposition analysed
[15] It is appropriate that I deal with the first two grounds in opposition together. [16] I can find in the material placed before me no evidence that the plaintiffs and
the defendant entered into a new agreement. The only evidence of any particular agreement whereby the plaintiffs loaned money to the defendant or interests associated with him is the offer dated 2 February 2007 and which was accepted on
19 February 2007.
[17] The fact that Mr McAllister gave a direction to the plaintiffs to pay the loan funds to the third party, namely J3 Ltd, does not form a basis for the proposition that there was a new loan made to that company as opposed to the original borrowers. Indeed, Mr McAllister, whose emails at the time describe himself as the winner of New Zealand mortgage broker of the year – 2004-2005, acknowledged that it was not uncommon for a borrower to give a direction for the moneys drawn down to be paid to a particular third party. That, of course, is frequently done when borrowers give directions for banks or builders, etc, to be paid from funds which are borrowed.
[18] The position, in any event was authoritatively dealt with in SB Properties Ltd (in liquidation) v Holdgate & Anor[2] where the court, cited with approval Lord Collins MR in Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd who said:[3]
that neither at law nor in equity could the burden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to somebody else; this can only be brought about by the consent of all three, and involves the release of the original debtor.
[2] SB Properties Ltd (in liquidation) v Holdgate & Anor [2009] NZCA 327.
[3] Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668 (CA).
[19] In short, a novation is required.
[20] The principle just cited is sufficient to dispose of the second of the grounds advanced by Mr McAllister. There is simply no evidence to show that the plaintiffs consented to some new contractual arrangement.
[21] I return to the first ground. What is self-evident is that the requests to uplift loan moneys were made by Mr McAllister to the plaintiffs. The only basis that exists in the papers before me for that position is the loan agreement of 19 February
2007.
[22] Mr McAllister, indeed, confirmed that position in an email which he sent to the second-named plaintiff, Mrs Cave, on 20 February 2009. He recorded in that email the following:
I signed a loan agreement at the commencement of the loan which includes a personal guarantee and I have subsequently confirmed details to you regarding the amount outstanding.
[23] I can find nothing in the material before me to suggest that the parties did not proceed on the basis that the original loan agreement provided the principal foundation for the advances that were made.
[24] My finding on that basis deals with the third ground advanced by Mr McAllister. The loan document itself contains the guarantee and provides sufficient evidence for the guarantee to be enforced, having regard to the Contracts Enforcement Act 1956, s 2(2). That Act was in force at the time of the guarantee.
[25] Mr McAllister raised a question as to whether there could be a loan to the J3
Partnership because he said such partnership did not exist. Mr Niemand correctly responded, in my view, to that submission by drawing attention to the Partnership Act 1908, s 17. Section 17 provides:
17 Persons liable by “holding out”
(1)Every one who, by words spoken or written, or by conduct, represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm is liable as a partner to
any one who has, on the faith of any such representation, given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.
[26] I have already referred to the fact that the loan offer acceptance was signed by Mr McAllister under the designation “signed on behalf of J3 Partnership”. The fact that the partnership never existed does not provide a basis for Mr McAllister to escape liability in this case. His liability arises by the operation of the Partnership Act 1908, s 17.
[27] I now consider the fourth ground advanced in opposition by Mr McAllister. That relates to the provision in the loan offer for the completion of additional documents. The plaintiffs’ position is that the reference in the contract to the completion of further formal documents was a clause inserted solely for the benefit of the plaintiffs and is severable. Mr Niemand submitted that in line with the decision in Hawker v Vickers[4] the plaintiffs were entitled to waive compliance with the condition with the result that Mr McAllister was denied the right to treat the condition as unsatisfied and was, nevertheless, obliged to complete the contract.
[4] Hawker v Vickers [1991] 1 NZLR 399 (CA).
[28] The factual circumstances which I set out in this case plainly show that this is how the parties proceeded. No further documentation was called for. The plaintiffs were happy to advance the moneys. The defendant sought the moneys.
[29] A second way of approaching this position is to determine whether the pre- requisites to the formation of a contract have in fact occurred in this case. They were identified in Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd:[5]
[5] Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 at
[53] per Blanchard J.
(a) An intention to be immediately bound (at the point when the bargain is said to have been agreed); and
(b)An agreement, express or found by implication, or the means of achieving an agreement (eg an arbitration clause), on every term which:
(i) was legally essential to the formation of such a bargain;
or
(ii) was regarded by the parties themselves as essential to their particular bargain.
That passage was endorsed in Verissimo v Walker.[6]
[6] Verissimo v Walker [2006] 1 NZLR 760 (CA) at 766 [19].
[30] As I have already recorded the facts show that both parties clearly intended to be bound by the loan agreement of 19 February 2007. The matter was put beyond doubt from the defendant’s perspective by his acknowledgement of the loan agreement and his personal guarantee in the email of 20 February 2009 to which I have made reference in [22].
[31] I find, therefore, no basis for the fourth ground in opposition.
Conclusions
[32] The plaintiffs are entitled to summary judgment. As I have recorded, quantum was not in issue. The plaintiffs have sought contract interest until the date of payment. Such a prayer was rejected in Nottingham v Registered Securities Ltd (in liq).[7] If that is to be pursued a separate claim can be made in new proceedings.
Judgment
[7] Nottingham v Registered Securities Ltd (in liq) 12 PRNZ 625 (CA).
[33] Accordingly, I enter judgment for $163,514.62 inclusive of interest at the contract rate to the date of judgment.
Costs
[34] The plaintiffs are entitled to costs as the successful party. The defendant shall pay costs, calculated on a ½-day hearing based on Category 2 Band B together with disbursements as fixed by the Registrar.
JA Faire
Associate Judge
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