Pacific Crest Limited v McDonald - [2021] NZHC 3072

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1688

[2021] NZHC 3072

BETWEEN
PACIFIC CREST LIMITED

Applicant

AND

BRIAN RONALD McDONALD

and
NORMA TIKA McDONALD

Respondents

Hearing: 2 November 2021

Appearances:

Joshua Pietras for the Applicant Respondents are self-represented

Judgment:

15 November 2021

JUDGMENT OF ASSOCIATE JUDGE TAYLOR

This judgment was delivered by me on 15 November 2021 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
Thomas Dewar Sziranyi Letts (Joshua Pietras), Lower Hutt, for the Applicant
Copy for:
Brian R McDonald and Norma Tika McDonald (the Respondents)

PACIFIC CREST LIMITED v McDONALD [2021] NZHC 3072 [15 November 2021]

Introduction

[1] This application to sustain a caveat arises from the purchase of a truck and trailer.

[2] The respondents, Mrs and Mr McDonald, are the directors and shareholders of McDonald Trust Trading Ltd (McDonald Trading),1 which conducts a scrap metal business in Panmure, Auckland. On 11 August 2020, the McDonalds approached finance broker Smart Money Ltd (the Broker), to arrange finance to purchase a truck and trailer in Blenheim from Smart Assets Ltd (the Vendor). They paid a deposit of
$17,700 to the Vendor on 2 September 2020.

[3] On 9 September 2020, McDonald Trading signed a Loan and Security Agreement (Loan Agreement) with the applicant, Partners Finance and Lease Ltd (Partners Finance), for a loan of $71,800.2 The agreement recorded McDonald Trading as purchaser, Partners Finance as vendor and the McDonalds as guarantors. Partners Finance took a security interest in the truck and trailer. Clause 28 provides for the unilateral assignment of the Loan Agreement:

[Partners Finance] may assign this loan and security agreement:

28.1 [Partners Finance] may assign or transfer, or otherwise create or permit a security interest in respect of some or all of our rights and obligations in this loan and security agreement or in the Goods to Pacific Crest Ltd or any other person without [McDonald Trading’s] consent. All our rights and powers under this loan and security agreement and in the Goods may be exercised by any assignee…

28.2 If [Partners Finance] assign[s] or transfer[s] this loan and security agreement to any other person [McDonald Trading] agree[s] that [Partners Finance is] not required to provide [McDonald Trading] with notice of the assignment and that the assignment does not in any way affect the terms of this loan and security agreement or [McDonald Trading’s] obligations.

[4] The Loan Agreement also includes a Guarantee and Indemnity, cl 6 of which provides:

1 McDonald Trust Trading Ltd changed its name to McDonald Trading NZ Ltd on 27 May 2021.
2 Total balance payable of $80,860.58.

To better secure the Guarantor’s obligations under this loan and security agreement in the event that the Customer is in breach of the Customer’s obligations under this agreement, the Guarantor agrees to mortgage all the Guarantor’s present and future interests in any land to us…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZHC 3072
Decision Date: 15 November 2021

CaseChat Overview and Summary

This case arose out of the purchase of a truck and trailer by the McDonalds. The respondents, Mr and Mrs McDonald, who are the directors and shareholders of McDonald Trust Trading Ltd, purchased the truck and trailer from Smart Assets Ltd and took out a loan with Partners Finance to cover the cost. Partners Finance assigned the loan and security agreement to Pacific Crest Ltd. The McDonalds have defaulted on the loan and Pacific Crest has lodged a caveat over the McDonalds' property. The McDonalds applied for the caveat to lapse. Pacific Crest applied for the caveat to be sustained.

The court considered whether Pacific Crest had a reasonably arguable case that it had an interest in the land sufficient to support a caveat. The McDonalds argued that the property was held in trust and that they had only signed the loan agreement in their personal capacities as guarantors. However, the court found that it was reasonably arguable that the McDonalds were validly appointed as trustees of the trust and that the property was held in trust. The court also found that it was reasonably arguable that by signing the loan agreement, the McDonalds, as trustees, created a caveatable interest over the property.

The court declined to exercise its residual discretion to remove the caveat, finding that the removal of the caveat could prejudice Pacific Crest's security position. The court also granted Pacific Crest's application for indemnity costs.

Orders