Pyne Gould Guinness Limited v Burnett HC Christchurch Civ-2003-409-2021
[2005] NZHC 1224
•3 February 2005
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2003-409-002021
BETWEEN PYNE GOULD GUINNESS LIMITED
Plaintiff
ANDGRAHAM LESLIE BURTON BURNETT AND JENNIFER JANE BOLLARD
Defendant
Hearing: 2 February 2005 Appearances: G D Jones for Plaintiff
Mr Burnett In Person for Defendants Judgment: 3 February 2005
JUDGMENT OF PANCKHURST J
Introduction
[1] Pyne Gould Guinness Limited (PGG) considers that the defendant partnership owes the company a total of $458,093.20 being the outstanding balance of a seasonal finance account operated by the partnership over several years. Judgment for that sum, plus costs, is sought.
[2] The proceeding began in October 2003 as an application for summary judgment. However, in early 2004 it was considered that the matter would probably be resolved by direct negotiations between the parties. Accordingly the summary judgment application was withdrawn and the case was transferred for a standard track hearing.
PYNE GOULD GUINNESS LIMITED V GRAHAM LESLIE BURTON BURNETT AND JENNIFER JANE BOLLARD HC CHCH CIV-2003-409-002021 [3 February 2005]
Background
[3] Commencing in 1996 the defendants farmed a leased property in North Otago near Duntroon. They opened an account with a predecessor company of PGG through which supplies required for the farming operation was sourced and to which credits arising from the sale of produce were credited. As Mr Burnett stressed in the course of his evidence for the defendants, drought conditions prevailed in North Otago over a number of summers following commencement of the farming operation. As a result the defendants experienced difficulties.
[4] In November 1999 the partnership was indebted to Reid Farmers Limited (a company subsequently taken over by PGG) for $376,305.16. Jennifer Jane Bollard (who is in fact married to and known as Mrs Burnett) mortgaged her interest in the estate of her late father to Reid Farmers Limited in order to secure ongoing financial accommodation. In so doing she acknowledged the then level of indebtedness which has accordingly been used as a starting-point for calculating the quantum of the present claim. A sum of about $150,000 was received from the estate and applied to reduction of the partnership debt.
[5] Nevertheless the defendants’ indebtedness to PGG continued to escalate. In 2002 the North Otago farming operation was terminated and the defendants moved to Rolleston. As at the date when the summary judgment application was issued PGG sought to recover a sum of $441,523.41. Interest continued to accrue on the debt. Hence, despite odd payments to the account $458,093.20 was outstanding at the end of January 2005, according to the records of PGG. This, I note, was after a deduction was made for legal costs incurred by PGG in the course of the present proceeding. As Mr Jones acknowledged in opening the relevant contractual terms which governed the operation of the seasonal account did not entitle PGG to automatically debit legal fees to the account. Accordingly, such debits were reversed for the purpose of this proceeding.
[6] When the summary judgment application was issued Mr Burnett filed a notice of opposition and affidavit on behalf of the partnership. In essence the opposition was based upon affidavit evidence to the effect that certain amounts had
been improperly brought to account, or were not brought to account with reference to the partnership seasonal arrangement with PGG. It shall be necessary to return to such items shortly.
PGG’s case
[7] Mr BHW Boyes gave the sole evidence in support of the plaintiff’s case. He is a branch manager with PGG. His evidence included reference to the relevant terms and conditions attaching to the partnership’s account, being:
3. Terms of Payment
3.1 For stock the purchase price plus GST together with any additional charges due are payable by the Purchaser to the Company within 14 days from the date of delivery unless otherwise specified. Grazing charges plus GST are payable 14 days from the date of invoice.
3.2 For grain, seed, merchandise and other goods and services the purchase price plus GST together with any additional charges due are payable by the Purchaser to the Company on the 20th day of the month following purchase unless otherwise specified.
3.3 Interest on overdue accounts will be calculated on a daily basis at rates being charged from time to time and debited monthly.
3.4 The Purchaser hereby waives all rights of set-off against the Company and the Vendor, and shall pay the purchase price plus GST to the Company without deduction.
8. Entire Agreement
8.1 These Terms and Conditions of Sale constitute the entire agreement between the parties and all statutory implied terms are to the extent permissible by law expressly excluded. These Terms and Conditions of Sale supersede all representations, agreements and all other communications made by the Vendor or the Company.
Mr Boyes’ evidence also included reference to the fact that he was personally involved in negotiations with the defendants in an endeavour to resolve the dispute. In particular Mr Boyes pointed out that such negotiations proceeded on the footing that the sum claimed was due and owing, the issue being rather how the defendants could pay the debt and whether PGG would accept the proposed payment terms.
[8] Such did not prove to be the case and accordingly the proceeding was set down for this defended hearing. Mr Boyes’ evidence extended to production of the relevant monthly invoices since the 1999 mortgage. These showed the makeup of the final debt and the debiting of interest charges to the account from month to
month typically, I note, a sum of over $4,000 per month in recent times. Save for two matters about which Mr Boyes was cross-examined, there was no challenge to the quantum of the claim. I shall refer to those two disputed matters now, when reviewing the defendants’ case.
Mr Burnett’s evidence
[9] Attention was drawn to one debit entry in the partnership account and to one transaction which did not feature in such account. These formed the basis of the defendants’ argument with reference to quantum.
[10] It is convenient to deal with the non-entry first. Mr Burnett produced an invoice dated 18 August 2002 for $12,009.37 which he had rendered to a Mr Kingsbury for bales of barley, wheat and pea straw. The gist of Mr Burnett’s evidence was that Mr Kingsbury took over the land which the partnership had previously farmed. PGG were involved in the take-over transaction. The straw was sold to Mr Kingsbury and the relevant invoice sent to him. Mr Burnett said that he had discussions with the local PGG manager to the effect that the company should collect the sum owed by Mr Kingsbury and apply it to part payment of the partnership debt. This had not occurred. Hence, a set-off was sought for that amount.
[11] Unsurprisingly Mr Boyes had no personal knowledge of this arrangement. He said, however, that he was familiar with the PGG file relevant to the partnership account and that there was no material on it to confirm an arrangement of the kind suggested. Moreover, he suggested that such an arrangement would be contrary to normal practice, in that PGG would only take an assignment of a debt if both of the relevant parties were clients of the firm and the matter was dealt with on a written and formal contractual basis. This was not the case, since Mr Burnett accepted that his dealings with the local manager had been purely verbal.
[12] That fact is necessarily decisive in relation to there being an assignment of the debt in terms of s130 of the Property Law Act 1952. The section requires that any assignment of a chose in action be in “writing under the hand of the assignor”,
Mr Burnett, with express notice of the assignment given in writing to the debtor. However, non-compliance with these requirements may not be fatal in relation to an equitable assignment of a chose in action. But even recognising that I am far from satisfied that there was an assignment of the debt in this case. It seems to me highly unlikely that a branch manager responsible for a client’s account which was considerably in debit would take an assignment of a debt due from another customer in part satisfaction of the overdrawn account. Thereby PGG would assume the risk of collection of the debt which, as Mr Boyes noted, is not an aspect of the company’s business. For such an arrangement to have been entered into in the absence of anything in writing impresses me as highly unlikely.
[13] For all that I do not doubt Mr Burnett’s evidence that he had a discussion with the local manager concerning application of the sum due by Mr Kingsbury to the partnership’s account. But this intention was not carried through. It follows that the appropriate course is for the defendants to recover the amount due from the debtor, rather than seek to set it off against their indebtedness to PGG. Incidentally, clause 3.4 of the terms and conditions (paragraph 7) also poses a fundamental problem in relation to this aspect of the defendants’ argument, but I need not dwell on this point.
[14]The second challenge to the quantum of the PGG claim related to a charge of
$45,368.03 debited to the partnership account on 9 January 2002 in relation to “bulk barley”. Thereby the indebtedness of the partnership increased to slightly over
$500,000. Again, Mr Boyes was questioned concerning this entry but he had no personal knowledge of it. Mr Burnett in evidence challenged the validity of this particular charge.
[15] As I understood it the effect of his evidence was as follows. PGG entered into forward supply contracts for barley required by Tegel. In turn the partnership agreed to harvest and supply grain to PGG in order to enable it to meet its on-supply obligation. Sometime prior to the 2001-02 growing season the defendants were unable to supply 100 tonnes of barley in terms of their contractual obligation to PGG for that particular season. Mr Burnett said that the shortfall was left to be remedied in the 2001-02 season but again, on account of drought conditions, the partnership
was unable to supply the required amount of grain. This was disclosed to the local manager and Mr Burnett’s understanding was that the normal “convention” would apply. That he explained was that PGG would not enforce it’s contractual entitlement to source the 100 tonnes from elsewhere and charge any extra cost to the partnership. Rather PGG would either negotiate to on-sell a lesser amount to it’s end customer or would source the shortfall from another farmer without cost to the non- supplier, in this case the partnership.
[16] Mr Boyes accepted that if PGG had on-sold grain and one of it’s farmer customers was unable to fulfil it’s contractual obligation to supply grain to that end, the company may source the shortfall from another grower and release the original supplier from their obligation in part. However, this course would only be taken if substitute grain could be obtained on the open market at the agreed price. Otherwise the company would be carrying the cost of the contract grower’s inability to meet their contractual obligation. These limited concessions impressed me as only logical.
[17]Against this background the thrust of Mr Burnett’s evidence was that the
$45,368.03 debit to the partnership account on 9 January 2002 for the purchase of 100 tonnes of substitute barley was irregular and should now be reversed producing a corresponding decrease in the quantum of the claim. There are fundamental problems in the way of my acceptance of this proposition. Although there was some oblique reference to this issue in Mr Burnett’s affidavit in opposition to the summary judgment application, the point was not formally pleaded in any way. Nor was any documentation relevant to the contractual arrangements between PGG and the partnership produced. Nonetheless it was implicit in Mr Burnett’s evidence that if a grower was unable to supply barley as agreed PGG were contractually entitled to source substitute barley from elsewhere and look to the grower to meet any additional cost. Hence, the gist of Mr Burnett’s evidence was that because he advised the local manager of the likely shortfall (in a subsequent season when seemingly further time had already been allowed) PGG was bound by convention not to look to the partnership for the additional cost incurred in obtaining substitute barley on an adverse market.
[18] The evidence does not persuade me that such a convention existed, let alone that PGG was bound to extend to the defendants the indulgence of non-insistence upon it’s contractual rights. I am also influenced by the circumstance that this issue has only surfaced at such a late stage. The sum involved is a significant amount. It would of course have been offset by a credit to the partnership for the 100 tonnes which were sourced from elsewhere, but such credit would have been at the contract price not the actual and increased price evidenced by the 8 January 2002 entry. Even so, I cannot understand how the defendants would have left this issue until now if there was a firm basis for a claim of the kind now suggested. Regrettably, I am driven to the conclusion that this argument is one born of desperation given the sad situation in which Mr and Mrs Burnett now find themselves.
[19] For these reasons I am unpersuaded that there is any basis to further reduce the quantum of PGG’s claim. I am satisfied that the company is entitled to judgment in the sum of $458,093.20.
Costs
[20] Mr Jones sought costs upon a 2B basis, but calculated to recognise the fact that the proceeding began as a summary judgment application which involved attendances to that end. On the other hand Mr Burnett advocated in the course of his evidence that “costs be met by each party”. In support of that contention Mr Burnett added that a major precipitating factor in relation to the defendants’ present problems was the adverse climatic conditions which the partnership experienced over a number of summers in North Otago. His evidence also referred to several reasons why a negotiated settlement had not eventuated and touched upon the difficult financial position of himself and Mrs Burnett at the present time.
[21] While I have every sympathy for the defendants’ position the matters raised are not of a kind which I am entitled to take into account in assessing costs. The unfortunate fact is that a very substantial sum is payable to PGG, in part attributable to accumulated interest, and costs must follow the event of this successful claim for recovery of that sum. Whether PGG may elect to compromise in relation to the
interest component or some other part of the judgment debt, is a commercial decision for the company to make in light of all the relevant circumstances.
[22] I agree with Mr Jones’ submission that it is appropriate in this instance to make a costs award which reflects the circumstance that the case began life as a summary judgment application. As will be apparent from the terms of the decision this was in reality a straight-forward debt collection proceeding. In those circumstances I consider that the appropriate course is to award costs on a 2B basis to be assessed as if this remained a summary judgment proceeding throughout. That is the allowances for preparation and hearing, as well as for all previous steps, are to be calculated in accordance with the scale for a defended summary judgment application. Reasonable and proper disbursements are also allowed in favour of the plaintiff.
Solicitors:
Lane Neave, Christchurch for Plaintiff
Defendants - Burnett & Associates, 493 Springston Rolleston Road, R D 5, Christchurch
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