Primary Wool Co-Operative Limited v Stevens - [2016] NZHC 2844

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000584 [2016] NZHC 2844

BETWEEN
PRIMARY WOOL CO-OPERATIVE

LIMITED Plaintiff

AND

JOHN ROBERT STEVENS Defendant

Hearing: 21 November 2016

Appearances:

M Riordan for Plaintiff
A Riches and V Nichols for Defendant

Judgment:

28 November 2016

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

Introduction

[1] The plaintiff, Primary Wool Co-Operative Limited (PWC), made advances to a company called Bruce Woollen Mill Limited (BWM) between 24 February 2014 and 17 October 2014. On the latter date BWM and PWC entered a loan agreement and on the same day BWM granted to PWC a General Security Agreement (GSA) over all its property. As well, the defendant, Mr J R Stevens, who is a director of BWM, signed a guarantee of the indebtedness of BWM to PWC, limited to $200,000
plus costs.1

[2] On 5 October 2015 Iain Nellies and Paul Jenkins were appointed as receivers of BWM by the J R and P J Stevens Trust, a family trust associated with Mr Stevens which held a second ranking security over the assets of BWM ranking behind the
GSA in favour of PWC.

1 There is ambiguity in the general security agreement in relation to whether the liability of
Mr Stevens also includes interest. PWC does not claim interest in the statement of claim.

[3] Under clause 6 of the loan agreement and clause 19 of the GSA it is provided that a default occurs in certain circumstances, one of which is the appointment of a receiver of BWM. Both documents provide that if a default occurs the security holder, PWC, may call up the balance of the secured monies. Both documents provide that notices that are required to be given must be given. By ss 128 and 129 of the Property Law Act 2007 a notice requiring remedy of the default within a period of 10 working days was required to be given. Notice was given under these sections to BWM on 23 February 2016, and this was served on Mr Stevens on 24
February 2016. Neither complied with the notice.

[4] In this proceeding PWC seeks payment by Mr Stevens of the sum of

$200,000, together with the expenses attendant on recovery. PWC applies for summary judgment.

Principles relating to summary judgment

[5] Under r 12.2(1) of the High Court Rules the Court may give judgment against a defendant on a summary basis if a plaintiff satisfies the Court that the defendant does not have a defence to a cause of action in the statement of claim on which a plaintiff relies. The onus of establishing this position rests on the plaintiff. The
classic exposition of this principle is in Auckett v Falvey:2

On a summary judgment application, the onus is on the plaintiff to show that there is no defence. On the present facts, the plaintiffs are able to pass an evidential onus to the defendants by exhibiting the contract which on its face, entitles them to the remedy they now seek. The…

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: [2016] NZHC 2844
Decision Date: 28 November 2016

CaseChat Overview and Summary

Primary Wool Co-Operative Limited (PWC) sued John Robert Stevens for $200,000 plus costs under a guarantee which Stevens signed in his capacity as a director of Bruce Woollen Mill Limited (BWM). PWC made advances to BWM and took security over its assets. BWM defaulted under the terms of the security and PWC called up the balance of the secured monies and enforced the guarantee. Stevens argued that the appointment of a receiver by BWM was invalid and that PWC had pressured the receivers to sell BWM’s assets at a low price, resulting in a shortfall which he was now liable to make good. The Court found that Stevens had raised arguable defences and dismissed PWC’s application for summary judgment. The Court reserved costs pending the outcome of the trial.

The Court held that Stevens’ defence to PWC’s claim for enforcement of the guarantee was not precluded by estoppel, given that PWC had not led Stevens to believe that the appointment of a receiver would not be treated as a default under the terms of the loan agreement and security documents. The Court found that Stevens had raised an arguable case that the receivers had breached their duty under the Receiverships Act 1993 by not realising the assets of BWM in the best way possible, and that PWC had pressured the receivers in relation to the sale of those assets. The Court found that there was sufficient evidence to show that PWC’s actions in relation to the sale of BWM’s assets might prejudice Stevens’ position as a guarantor, and that the events might arguably give rise to a defence to PWC’s claim under the guarantee.

Orders