O'Connor v Law Debt Collection Ltd

[2015] NZHC 2265

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-3315 [2015] NZHC 2265

UNDER	the District Courts Act 1947
IN THE MATTER	of an appeal against the decision of the District Court
BETWEEN	PATRICK MICHAEL O'CONNOR Appellant
AND	LAW DEBT COLLECTION LTD Respondent

Hearing:	25 June 2015 and 4 September 2015
Counsel:	D G Hayes for Appellant N Tabb for Respondent
Judgment:	18 September 2015

JUDGMENT OF BREWER J

This judgment was delivered by me on 18 September at 3:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Hunwick Law Ltd (Hamilton) for Appellant

Natalie Tabb (Auckland) for Respondent

Counsel:           David Hayes

O'CONNOR v LAW DEBT COLLECTION LTD [2015] NZHC 2265 [18 September 2015]

Introduction

[1]      The appellant, Patrick O’Connor, appeals against a decision of Judge C S

Blackie delivered in the District Court at Manukau on 28 November 2014.

[2]      The  respondent,  Law  Debt  Collection  Ltd  (LDC),  is  a  debt  collection company.  In the course of its business it informed a company that provided a credit rating service that Mr O’Connor was a defaulting debtor.  Mr O’Connor, as plaintiff in the District Court, claimed that the LDC was wrong to conclude that he was a defaulting debtor.  Mr O’Connor claimed that the defaulting debtor was actually a Trust with which he was involved.  He pleaded that LDC’s advice to the credit rating service was misleading or deceptive conduct in trade, contrary to s 9 of the Fair Trading Act 1986 (“the FTA”).  He also pleaded a claim in negligence alleging that LDC owed him a general duty of care to ensure he was correctly named as a debtor. He sought a mandatory injunction to compel the respondent to withdraw his details from the credit rating service, and $5,000 in general damages.

[3]      Judge  Blackie  held  that  Mr  O’Connor  is  the  defaulting  debtor,  and accordingly LDC made no error in informing the credit rating service that he was a defaulting debtor.   The gravamen of the appeal is that this  conclusion was not available to the Judge on the evidence before him.  Mr O’Connor’s notice of appeal, and submissions, are on this point.

[4]      LDC submits that the Judge did not err. But it also raises another point in opposition: that Mr O’Connor was time-barred in his claim.  This point was raised before the District Court Judge but is not mentioned in his Honour’s judgment.

[5]      During the relevant period, the applicable legislation was s 43 of the FTA.1

Section 43(5) reads:

An application under subsection (1) may be made at any time within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.

1 The respondent cites s 43A, but that was enacted by the Fair Trading Amendment Act 2013. In any event, the sections are very similar.

[6]      It is clear that Mr O’Connor knew in early 2009 that he was listed as a defaulting debtor.  Mr O’Connor was cross-examined on that point.2   Mr O’Connor did not commence his proceeding in the District Court until some four years later. However, Mr Hayes for Mr O’Connor submitted to me orally that LDC cannot rely on s 43(5) because it did not plead it.  He relies on the decision in AMP Finance NZ Ltd v Heaven3 where the Court of Appeal held that s 43(5) is an ordinary limitation period that must be pleaded by the defendant.  Ms Tabb for LDC accepts that she did not mention it in the notice of defence.4

[7]      In any event, Mr Hayes stresses that even if the FTA claim is limitation barred, the claim in negligence is not.5

[8]      Finally, one further point I raised with counsel was to do with the nature of the remedy that Mr O’Connor seeks.  The evidence of Mr Campbell for LDC is that the appellant’s details are no longer held by the company which provides the credit rating service.  His uncontradicted evidence is that such details are held for only five years and are then discarded.   Therefore, if Mr O’Connor’s appeal is successful, there would be no need for me to order mandatory injunction to compel the LCD to withdraw his details from the credit rating service.

Issues

[9]      I see the issues on appeal to be:

(a)       Did Judge Blackie err in coming to the conclusion that Mr O’Connor

was the defaulting debtor?

(b)      Can LDC rely on the limitation bar in s 43A of the FTA?

2      Notes of evidence at 32 of the bundle.

3      AMP Finance NZ Ltd v Heaven CA151/97, 11 December 1997 at 5.

4      When the proceeding was commenced in the District Court, rr 2.12 and 2.13 of the District Courts Rules 2009 applied. These rules required the defendant to set out its claim in defence on a form entitled “Response by defendant” (schedule 1, form 3).   These rules have since been superseded by the District Courts Rules 2014.

5      Limitation Act 1950, s 4.

(c)      Does the fact that the primary remedy that Mr O’Connor seeks is no longer  required  have  any  bearing  on  whether  I  should  allow  the appeal?

[10]     I note that if I agree with Judge Blackie that Mr O’Connor was the defaulting debtor, then the appeal will be dismissed.  If, however, I disagree with his analysis, and depending on my findings in relation to the limitation bar and the remedy sought, I will need to consider what further steps need to be taken in relation to both the FTA claim and the negligence claim.

Approach to appeal

[11]     This appeal is brought under s 72 of the District Courts Act 1947.  The appeal proceeds by way of a general appeal.  Chief Justice Elias in Austin, Nichols & Co Ltd v Stichting Lodestar6 held that for general appeals, the appellate Court is entitled to its own opinion about the facts and the law.  So, the appellate Court is entitled to make a decision based on all the evidence presented to the lower Court without necessarily  deferring  to  the  lower  Court’s  judgement.    However,  where  it  is  a question of credibility and the lower Court has had a chance to actually listen to the witnesses, some deference to the lower Court’s judgement may be appropriate.

Did the Judge err in making the factual finding that the appellant was the defaulting debtor?

Factual background

[12]     In November 2007, a building consultancy firm, CoveKinloch Consulting (CoveKinloch), was engaged on behalf of a client by solicitors, Grimshaw & Co, to provide expert advice in respect of a leaky homes dispute involving a property in Auckland (the property).   CoveKinloch carried out this work between November

2007 and October 2008 and rendered a total account of $20,499.53.   It was never paid.   CoveKinloch resorted to the debt collection services of LDC.   LDC took recovery  action  by  issuing  warnings  and  notices.    Subsequently,  LDC  referred

Mr O’Connor’s name to a credit reporting agency for entry on the default listings database.

[13]     I agree with Judge Blackie when he said:7

The  key  to  this  case  is  a  determination  as  to  whether  the  plaintiff, Mr O’Connor, was correctly named debtor as far as the accounts rendered by CoveKinloch were concerned. If he is a debtor and the debt remains unpaid or not otherwise settled, then he can hardly complain if he finds himself listed on a debt collection agency’s database. If, on the other hand, he is not the debtor, then he would be entitled to some remedy in respect of the error made.

[14]     At  the  District  Court,  LDC  said  that  Mr  O’Connor  was  the  debtor. Mr O’Connor said he was not the debtor, rather the debtor was Overview Trustee Ltd (Overview), a company which was trustee of the Carragifoyle Trust (the Trust).

[15]     Mr O’Connor was the settlor of the Trust, which was created in October

2008.  He is a discretionary beneficiary and the person with the power to appoint and remove trustees.  Overview was a company of which Mr O’Connor was a director. Mr O’Connor resigned his directorship on 7 August 2007 but was then was re- appointed on 20 June 2008.  Mr O’Connor signed the trust deed, both on behalf of himself as settlor, and on behalf of Overview, as trustee.  Mr O’Connor says that the property is held by the Trust.

Judge Blackie’s reasoning

[16]     Judge Blackie concluded that Mr O’Connor was the defaulting debtor for the

following reasons:

(a)      The solicitors acting in respect of the leaky home dispute indicated to CoveKinloch that the property was purchased by Mr O’Connor and that they were acting on the instructions of Mr O’Connor.  There was no evidence that they were acting on the instructions of the Trust or Overview, or the then director of Overview, Mr Fletcher.

(b)The  offer  of  service  dated  16  November  2007  is  addressed  to Mr O’Connor.    The  document  refers  to  telephone  discussions  and email communications with Mr O’Connor and outlines the scope of work, the hourly rate and a budget estimate.

(c)      The offer was accepted on 19 November 2007.   The signatory is CM O’Connor, the son of Mr O’Connor.  There was no evidence of the capacity in which he signed, but the Judge said the overwhelming inference to be drawn, since Mr O’Connor paid the initial deposit to CoveKinloch,   is   that   he   signed   as   the   agent   of   his   father, Mr O’Connor.

(d)There was no evidence that the Trust, Trustee Company or director of the Trustee company undertook responsibility to pay the account.

(e)      When the dispute as to paying CoveKinloch’s charges arose, it was Mr O’Connor who had all the dealings with CoveKinloch, the lawyers and LDC.   The correspondence between LDC and Mr O’Connor’s solicitor indicates Mr O’Connor was making settlement offers, and also  included  statements  that  he was  not  prepared  to  increase his without prejudice offer and that he intended to file a counterclaim.

Appellant’s submissions

[17]     Mr Hayes for Mr O’Connor submits that the Judge erred in finding that

Mr O’Connor was the defaulting debtor for the following reasons:

(a)       Mr O’Connor did not sign the contract, his son did in the capacity of a

director of an unstated entity.

(b)All invoices were issued to the Carrigafoyle Trust.   CoveKinloch’s first communications with the debt collector stated that the Trust was the debtor.

(c)      At the time that the proposal was accepted, Mr O’Connor was not a

director of Overview or the Trust.

(d)      Settlement proposals to and from LCD referred to the Trust.

(e)       There were other logical inferences available to the Judge as to the capacity in which Mr O’Connor’s son signed the contract.

Discussion

[18]    The debt arose due to a failure to pay the price in a contract between CoveKinloch and another party.  I am required to determine who entered the contract with CoveKinloch. Was the contracting party Mr O’Connor or was it Overview?

[19]     The parties to a contract are the persons from whose communications with each other the agreement between them has been reached.8   The common law takes an objective approach determining the existence of a contract.   So, although the courts will often say that consensus ad idem or a “meeting of the minds” is required for the formation of a binding agreement, it is clear that an apparent consensus will suffice.  What this means is that if a promisee can establish that the promisor led her

reasonably to believe that he agreed to and intended to be bound by certain terms, the promisor is so bound notwithstanding that he did not actually agree to be bound by those terms.9   It is permissible when considering contract formation to look at the subsequent words and conduct of the parties towards one another.10

[20]     But, this does not mean that the actual beliefs of the parties are irrelevant.11

As Professor McLauchlan puts it:12

Accepting and giving effect to, for example, an actual mutual intention of the parties is not inconsistent with, and hence does not require the making of an exception to, the objective approach.

8      HG Beale (gen ed) Chitty on Contracts (31st ed, Sweet & Maxwell, London, 2012) at [18-004].

9      Smith v Hughes (1871) LR 6 QB 597 at 607. See also David McLauchlan “The Drastic Remedy

of Rectification for Unilateral Mistake” (2008) 124 LQR 608 at 610–611.

10     Electricity Corp of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA)

at [56]; Pascoe Properties Ltd v Attorney-General [2014] NZCA 616 at [73].

11     Electricity Corp of New Zealand Ltd v Fletcher Challenge Energy Ltd, above n 10, at [138];

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 at [266] per Campbell JA

12     McLauchlan, above n 9, at 610.

[21]     When LDC began to pursue Mr O’Connor, Mr O’Connor made a settlement offer to CoveKinloch.   In the email correspondence between Mr O’Connor, his lawyers and LDC, Mr O’Connor made it very clear that he would not increase that settlement offer and that he was intending to file a counterclaim.   This conduct indicates to me that Mr O’Connor had an actual belief that he had entered into an agreement with CoveKinloch whereby he was under a contractual obligation to pay the price for the services that CoveKinloch carried out in relation to the property.

[22]     Even if I am wrong about Mr O’Connor’s belief, I have reached the view that on the balance of probabilities Mr O’Connor led CoveKinloch to reasonably believe that he agreed to be bound by an obligation to pay the price for the work carried out by CoveKinloch in relation to the property:

(a)      The letter of engagement which would form the basis of the contract was sent to Mr O’Connor by CoveKinloch.  The letter of engagement refers  to  telephone  discussions  that  Mr Armitage,  the  Operations Manager of CoveKinloch, had with Mr O’Connor.   Having read the letter,  I  understand  it  as  an  offer  from  CoveKinloch  made  to Mr O’Connor. There is no mention of the Trust or Overview.

(b)That offer was accepted.   It was signed by a “C M O’Connor” as a “director” of an unstated entity.  I am prepared to accept the evidence that  the fact  that  Mr O’Connor’s  son  signed  the letter was  never brought to anybody’s attention until the District Court hearing seven years later.   Furthermore, Mr O’Connor delivered the letter and the cheque containing the deposit to Mr Armitage in person, which would give further support to the notion that CoveKinloch thought it was contracting with Mr O’Connor.

(c)      After the work was carried out and when Mr O’Connor did not pay, CoveKinloch contacted him directly to arrange for payment.  This is reflected in emails dated 4 and 12 June 2008.   In addition, when CoveKinloch    contacted    LDC,    CoveKinloch    told    LDC    that Mr O’Connor  was  the  debtor  and  that  he  was  charged  under  the

Carrigafoyle Trust.   This documentary evidence is consistent with a reasonable   understanding   on   the   part   of   CoveKinloch   that Mr O’Connor was the debtor.

(d)I give little weight to the fact that the invoices are addressed to the Trust.  A debt cannot be owed by the Trust.  A trust is not a separate legal entity with a separate legal personality in the way that a limited liability company is.   The trust is constructed by the rights and obligations in relation to the trust property attaching to the trustee in a personal capacity.13   Furthermore, the statement of account sent to the Trust on 2 December 2008 where it gives the description of all the work done and invoiced has “Sale; O’Connor, Mr P”.   Again, this

supports a reasonable belief that CoveKinloch was contracting with

Mr O’Connor.

[23]    I conclude that Mr O’Connor entered into a contractual agreement with CoveKinloch.  He is liable for the purchase price under the contract.  He failed to pay the price.  Accordingly, he is a debtor in default.  I concur with Judge Blackie’s findings.

[24]     As I have concluded that Mr O’Connor was the party to the contract, and

therefore the defaulting debtor, the other issues in this appeal fall away.

Decision

[25]     The appeal is dismissed.

Costs

[26]     Costs on the District Court proceeding shall remain as ordered in the District

Court.

13     Andrew  Butler  “Trustees  and  Beneficiaries”  in  Andrew  Butler  (ed)  Equity  and  Trusts  in

New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 105 at 145-146.

[27]     I award costs on the appeal against the appellant on a 2B basis.

Brewer J