South Canterbury Finance Limited v Kale HC Nelson CIV 2010 442 112

[2010] NZHC 957

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2010 442 000112

BETWEEN  SOUTH CANTERBURY FINANCE LIMITED

Plaintiff

ANDDENNIS MAXWELL KALE Defendant

Hearing:         15 June 2010

Appearances: A R J Bowers for Plaintiff

D E Holloway for Defendant

Judgment:      15 June 2010

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

Introduction – the nature of the proceeding

[1]      The plaintiff (South Canterbury) sues the defendant (Mr Kale) in relation to a guarantee he gave.  The plaintiff seeks summary judgment.

Background

[2]      I will deal first with the historical background to this proceeding. [3] Mr Kale is the sole director of Buster Holdings Limited.

SOUTH CANTERBURY FINANCE LIMITED  V DENNIS MAXWELL KALE HC NEL CIV 2010 442

000112  15 June 2010

[4]      In March 2008 Buster for $425,000.00 purchased the business, including the lessee’s interest, in the Arcadia Motel at Tahunanui.  To effect the purchase Buster obtained a $260,000.00 revolving credit facility from Tasman Bay Finance Limited (which has since amalgamated with the plaintiff, South Canterbury).  I will refer for convenience to Tasman Bay and South Canterbury as “South Canterbury”.

[5]      South Canterbury as security took:

i.     A first mortgage over the leasehold interest.

ii.     A registered first general security agreement (GSA). iii.         A guarantee from Mr Kale.

[6]      In September 2008 Buster obtained a further $40,000.00 revolving credit facility for a term of five months.  It was subject to the same securities and guarantee as the first facility.  Mr Kale explains in evidence that this advance was obtained to “counter the effects of the global financial crisis”.   It was not explained what the precise effect of that on the business was but it is to be inferred that the business was not  producing  sufficient  revenue  to  meet  the  company’s  obligations.    Mr  Kale needed the loan for working capital.

[7]      The Kale evidence is that Buster used ASB Bank for retail banking but could not obtain long-term overdraft facilities as ASB considered South Canterbury had all the security through the mortgage on the loan.

[8]      Essentially there is no dispute as to this historical background. [9]     The more immediate background is this.

[10]     Buster  defaulted  on  its  contractual  obligations  to  South  Canterbury.    In February 2009  Buster  failed  to  repay the  second  advance  when  it  was  due  for repayment.

[11]     In December 2009 it failed to pay interest due on the first advance.  Both sets of principal remain unpaid to today and there is no suggestion that the $260,000.00 is not still owed.

[12]     The plaintiff’s calculation of interest is also unchallenged.

[13]     On 9 December 2009 South Canterbury, pursuant to its GSA, appointed one Patrick Norris as receiver of Buster.  Mr Norris resigned in February 2010 and South Canterbury replaced him with one Grant Meikle.

[14]     The plaintiff made demand for repayment on both Buster and Mr Kale on

31 March 2010.  Under the contract interest was running on the $260,000.00 from

1 December 2009 at 13.8% per annum and on the $40,000.00 from 11 February 2009 at 15% per annum.

[15]     In issuing the proceeding the plaintiff sought judgment against Mr Kale for principal and interest on the basis of the contracts.

[16]     It also sought judgment for its solicitor/client costs incurred in enforcing its rights as the standard terms of the contract provided.

Adjournment application

[17]     In the course of his submissions this morning for the defendant, Mr Holloway made application for an adjournment of the proceeding.  At that point, Mr Bowers in the normal order, had presented and completed his submissions.

[18]     The defendant’s application for adjournment had not been made prior to today’s hearing, nor had it been foreshadowed either in the written synopsis filed in advance, nor had it been made at the start of the hearing today.

[19]     Mr Holloway raised the possibility of adjournment should the only concern of the Court be as to the strength of the defendant’s evidence or submissions.  He

referred to the decision of the Court of Appeal in Bank of New Zealand v Ginivan CA 280/89 21 September 1990.  In particular he noted the passage in the judgment of the Court delivered by Casey J in which it was said:

This is not a case where the proposed defence appears to be speculation bolstered by the hope that something may turn up on discovery.

Mr Holloway effectively invited the Court to conclude that there might be lines of defence or a strengthening of defence available to Mr Kale through either the process of discovery or further attention to the detail of the defence.

[20]     The comments of the Court of Appeal in the Ginivan case were in a different context – the Court was dealing with the distinction between judgment for liability only and judgment for both liability and quantum.   There was no suggestion of adjournment of the hearing which had already been completed.  What the Court of Appeal held was that the Master had been correct to order a trial as to quantum.

[21]     There are no good grounds to adjourn the proceeding in this case.   Both parties had ample notice of the hearing and indeed filed additional evidence which they considered appropriate before the hearing.  The evidence covered the issues of liability.  There are no issues as to quantum.

[22]     I decline the application for adjournment.

Reluctant deponents

[23]     It is convenient to deal with one other procedural aspect of the submissions made by Mr Holloway.  Mr Holloway observed in the course of his submissions that the first receiver, Mr Norris, had been unwilling to give Mr Kale an affidavit to assist his opposition.   Mr Holloway submitted that the reasons for such unwillingness would not be surprising to the Court in that Mr Norris (as former receiver) was in a conflicted position.

[24]     Mr Holloway effectively asked the Court against that background to give greater credence to hearsay evidence which Mr Kale had given in his affidavits.  Mr Kale had ascribed a number of comments to Mr Norris which suggested that South Canterbury had been interfering in the receivership conducted by Mr Norris.   The evidence went into more detail as to what Mr Norris was suggested to have said.

[25]     It is not uncommon in summary judgment proceedings, or indeed in other interlocutory proceedings, to come across reluctant witnesses.   The matter is the subject of commentary in McGechan on Procedure at HR 12.9.13.  The authors refer to the express provisions of r 9.75 High Court Rules which deal with the situation of a person refusing to make an affidavit.  The authors state:

Applications for orders  under r 9.75 should be made at as early a stage as possible, because eleventh hour applications  to have evidence taken orally are inappropriate for the summary judgment procedure: Smith & Smith Limited v Flexaweb Upholstery Ltd 25/6/87, Smellie J, HC Auckland CP463/87. The affidavit in support of the application must set out the facts, including the evidence that the witness is likely to give, and make it patent that the witness is refusing to make an affidavit and not merely reluctant or unwilling:     Caulderwell  v  Taranaki  Newspapers  Ltd  26/4/89,  Master Williams QC, HC New Plymouth CP68/88.

[26]     Accordingly, it is far too late for the defendant to request the Court at the hearing of a summary judgment application to allow further time for a witness to be dealt with under r 9.75.  As it is, there is no proper application for evidence before the Court.  In terms of the evidence before the Court the highest Mr Holloway puts the matter is that Mr Norris has been unwilling to give evidence.  I note that I did not find any passage in the evidence of Mr Kale which clearly stated even that.  In any event, unwillingness is not the test – the test under r 9.75 is whether there has been a refusal: see Caulderwell above.

[27]     That leaves Mr Kale’s evidence containing substantial passages of hearsay reliance upon what Mr Norris is alleged to have said to him.  It is not for the Court to fill a gap in the evidence led by a defendant who had procedures available to him.  It would be wrong for the Court to make an assumption as to the evidence which might or might not have been given by a person such as the receiver.  It is the admissible

evidence before the Court which must determine the outcome of the summary judgment application.

Summary judgment principles

[28]     Before turning to some particular aspects more relevant to this summary judgment application, I summarise the general principles which I adopt in relation to this application:

(a) The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence.  The Court must be left without any real doubt or uncertainty on the matter.

(b) The  Court  will  not  hesitate  to  decide  questions  of  law  where appropriate.

(c) The  Court  will  not  attempt  to  resolve  genuine  conflicts  of evidence or to assess the credibility of statements and affidavits.

(d) In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts.  It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.

(e) In weighing these matters, the Court will take a robust approach and  enter  judgment  even  where  there  may  be  differences  on certain factual matters if the lack of a tenable defence is plain on the material before the Court.

(f) Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the

context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.

[29]     I now turn to some particular judicial observations which are relevant in this case given the arguments I heard.

[30]     The Court of Appeal in Cegami Investments Ltd v AMP Financial Corp (NZ) Ltd [1990] 2 NZLR 308 at 314 said this:

...the summary judgment procedure was introduced as a much needed improvement to the rules and its effect on the just and speedy disposal of numerous claims was immediate and dramatic. Indeed, without the benefit of this procedure, it is hard to see how the High Court could have dealt with the mass of litigation in recent years following the collapse of the share and property markets, and it has undoubtedly gone a long way in restoring the confidence of the commercial community in the Courts.

[31]     This passage, arising out of the financial crisis following the October 1987 share market crash, has resonance in the current era which in Mr Kale’s own words amounted to a “global financial crisis”.   It is has been that crisis he says which impacted on the business of Buster.

[32]     Earlier, the Court of Appeal in Bilbie Dymock Corporation v Patel & Bajaj

(1987) 1 PRNZ 84 at 85 (per Cooke P) had stated:

The  need  for  judicial  caution  has  to  be  balanced,  when  considering  a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that it called for by the particular facts of the case. In the end it can only be a matter of judgment on the particular facts.

The general grounds of opposition

[33]     Against this background I turn to the general grounds of opposition.   As appears to happen not uncommonly, despite the requirement to identify grounds of opposition, the notice of opposition in this case was very general.  In it the defendant identified two grounds of opposition:

2.1The defendant has a defence and/or set-off to the cause of action in the statement of claim.

2.2The defendant has a claim against a third party and it would be unjust to allow the plaintiff to have judgment without bringing that claim into account.

[34]     The defendant’s case as developed in submissions by Mr Holloway came to focus on the first ground of opposition in particular, with reliance upon the principles of equitable set-off.  I will return to those and deal with them in more detail.

[35]     It is convenient first to deal with the reference to the possibility of third party claims.

The relevance of third party claims

[36]     At a hearing on 18 May 2010 I granted the defendant leave to issue third party notices but on the express basis that such leave did not interfere with the plaintiff’s rights to have a hearing on the summary judgment application.

[37]     The  defendant  on  1  June  2010  filed  third  party  notices  against  the  two receivers, together with the associated documents.  The defendant alleged that each of the receivers had acted in breach of his equitable duty to act in good faith.  The allegations included particulars as to the directors’ acting at the direction of South Canterbury.

[38]     Mr Holloway responsibly did not develop any submissions suggesting that the Court should refuse summary judgment simply because claims were alleged to exist against third parties.  Rather, the emphasis of Mr Holloway’s submissions was that  the  aspect  of  interference  by  South  Canterbury  in  the  conduct  of  the receiverships was a matter which the Court should properly take into account in the summary judgment  context.    It  is  therefore  unnecessary to  further  examine  the claims against the third parties.  I instead focus on the evidence in this proceeding as to the conduct of the plaintiff itself.

Equitable set-off and cross-claim

[39]     It  was  common  ground  between  counsel  that  the  applicable  principle  in relation to a defendant’s claim of set-off or cross-claim in a summary judgment context is conveniently stated by the Court of Appeal in Grant v NZMC Limited [1989] 1 NZLR 8. At p 12 Somers J (for the Court) said:

The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand. It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.

[40]     Grant v NZMC Limited was applied by the Court of Appeal in Edmonds v Westland Bank Limited [1991] 2 NZLR 655. In that case the appellants had guaranteed the debt of a hotel operation to a bank. The appellants’ case in opposition to summary judgment was that the bank had interfered in a receivership, rendering the recover the bank’s agent, and there had been negligence in the advertising in relation to the marketing of the sale of the hotel. Allowing the appeal, the Court of Appeal found that on the evidence of a real estate salesman the defendant had established an arguable defence by way of counterclaim for losses incurred as a result of alleged negligence, the counterclaim arising out of the same contract, namely the debenture between the bank and the appellants as principal debtors.

[41]     These  cases  recognise  principles  which  are  directly  relevant  to  their application in this case.

The specific allegations of set-off or cross-claim in this case

[42]     As the grounds of opposition filed in this case did not truly identify the particular factual matters relied on by the defendant, Mr Holloway accepted in his submissions that one had to look to Mr Kale’s first affidavit to identify the factual

grounds.   He referred particularly to paragraphs 14 – 23 of that affidavit.   It is convenient  to  set  out  those  grounds  in  full,  together  with  (for  the  purposes  of context) paragraphs 13 and 24.

[43]     Mr Kale’s affidavit contained this:

13.I believe that the actions of the plaintiff since appointing a receiver have been illegal and unethical.  This view appears to be shared by the first receiver appointed, Pat Norris (“Pat”) who told me that he resigned from being receiver due to the actions of the Plaintiff which made it impossible for him to properly undertake his role as the receiver.   I believe he would support the following statements if required to testify.

14.The  Plaintiff,  at  the  direction  of  Gene,  specifically  directed  the receiver who to appoint as managers of the motel.  The necessity to appoint a manager should have been determined by the receiver, not Gene.  Pat has since told me that there was no reason why I could not have stayed on and run the motel.   But in addition and more importantly Gene told Pat this his (Gene’s) parents-in-law (“the Morgans”) were to be appointed as managers which I believe created a clear conflict of interest.  I believe that other friends and relatives of Gene, or the Morgans, have also been employed in the motel.

15.I am aware that since the Morgans have been appointed as managers that over $20,000 of maintenance has been carried out on the manger’s residence where the Morgans were to live.   I know this was done without consulting the owner, who was very irate about it. I had lived in that residence for 2 years and believe that it needed at the most some new carpet and can produce several witnesses to testify to  that.   This  work was  authorised by Gene.    Again  my contention is that this over-rides the functions of the receiver, in particular the importance of all financial decisions concerning the continued operation of the business being made or authorised by the receiver.

16.I also believe that the Morgans were getting paid significantly more than the usual managers’ salary for running a motel.   Again, I understand that the amount of their wages was determined by Gene. Again this should have been a matter for the receiver.

17.When  considered  that  Gene  has  invoked  a  receivership,  self- appointed his in-laws as managers, authorised expensive and unnecessary work to the manager’s residence for them to live and paid them at excessive rates (all outside of his role in a receivership) I believe there are serious conflict of interest issues.  The net result of which have wasted equity in the motel.  I believe that it goes to the point where the decision to appoint receivers itself must be questioned.

18.      I  have  been  informed  that  Pat  retired  as  receiver  stating  in  a complaint to the Companies Office that the interfering, unethical and illegal actions of Gene Cooper made it impossible for him to do his statutory role as a receiver.   I am aware that my solicitors have contacted the Companies Office on 12 May 2010 to ask for a copy of this report but that the Companies Office has declined to release it claiming privilege.   I annex and attach the email response my solicitors have received from the Companies Office as “exhibit A”.

19.I was trespassed from the Motel after the receivers were appointed, and have had little ability to access records and accounts.  I seek the opportunity to do so to verify my contentions.   I believe there are other issues that should be investigated as well as follows:

20.The Morgans have tried to alter bank account deposit details with both Vianet and Wotif booking agencies.   Any banking operation should only be done through a receiver.

21.SCF has altered details of the Purchase and Sale Agreement that was organised through the receiver Pat.

22.SCF has assured people in correspondence that Pat Norris was the receiver after the date of his retirement.

23.That further items of unnecessary expenditure have occurred that deflates the equity in the motel.  I believe Pat has these details.

24.In summary I believe that the illegal and unethical actions of Gene, to the point where the first receiver felt compelled to resign, have seriously undermined the receivership and have drastically wasted equity in the motel therefore if his actions are proven as illegal, then the receivership should be invalidated.  I have been advised that the receivers may have to be joined as third parties to this proceeding if the matter is not dealt with by way of summary judgment.

[44]     In his oral submissions, Mr Holloway summarised the four key areas of Mr

Kale’s evidence as being in relation to:

i.The employment of the Morgans as managers of the Arcadia Motel when the Morgans were relations (parents-in-law) of the general manager of South Canterbury’s Tasman branch (responsible for the supervision of the contracts in question).

ii.     The incurring of unnecessary expenditure on the Arcadia Motel. iii.   Interference with the motel’s bank accounts.

iv.Interference  in  the  agreement  for  sale  and  purchase  of  the  motel business.

[45]     For the plaintiff Mr Cooper filed a reply affidavit refuting as untrue the content of paragraphs 13 to 17, 20 and 23 to 25 of Mr Kale’s affidavit.

[46]     In his submissions, Mr Bowers for South Canterbury attacked each head of the defendant’s complaints, both by reference to the detail of each paragraph and by a more generic reference to what he submitted were gross inadequacies in the evidence.

[47]     It is convenient to analyse the defendant’s alleged grounds of defence by reference to these generic criticisms.

[48]     Fundamentally, Mr Bowers attacked the allegations as being unsupported by admissible evidence.  Substantial tracts of what Mr Kale had to say were hearsay. That is exemplified by the very first paragraph from Mr Kale’s affidavit, (paragraph

13) which I have quoted above – Mr Kale says that his view about the receivership appears to be shared by the first receiver.  Mr Kale goes on to tell the Court what the first receiver told him.  The pattern then continues through Mr Kale’s affidavit.  In the very next paragraph (14) there is repeated reliance on hearsay.

[49]     Similarly, the allegations in paragraph 16 as to the level of remuneration to the managers are based on hearsay.

[50]     Similarly, the allegations in paragraph 18 as to interference are based on hearsay.

[51]     In Ports of Auckland Ltd v The Ship “Raumanga” (1998) PRNZ 84 at 86

Giles J made these observations in relation to a case where the defendant had filed affidavits containing hearsay evidence:

Although a summary judgment application is interlocutory it is not, in my view, to be treated as a purely procedural interlocutory where an attitude of

flexibility as to hearsay is often extended. It is a substantive interlocutory because if the application succeeds the action will have been resolved by the entry of judgment. For that reason the rules of evidence must be complied with.

In this case the owners took a very significant risk in failing to produce directly admissible evidence on crucial points, especially when it was readily available.

However, counsel for the plaintiff adopted the pragmatic safeguard of presenting  an  affidavit  which  fully  addressed  the  hearsay  contentions, without prejudice to his right to maintain the strike-out application. Mr Osborn's evidence provides a reliable answer to the otherwise inadmissible evidence contained in Mr Brown's affidavit. I prefer to deal with the matter on a substantive, not technical, basis. However, it is appropriate to warn litigants, and their solicitors and counsel, that they must adhere to the rules, particularly in summary judgment applications. If they fail to do so, they will be at risk of the Court declining to receive evidence. The liability consequences for the litigants and their solicitors hardly need re-stating.

[52]     Mr Bowers submitted, correctly, that the observations of Giles J in the Ports of Auckland case are directly applicable to the affidavit evidence from Mr Kale.  I apply those principles and reject reliance on the hearsay aspects of his evidence.

[53]     Secondly, Mr Bowers attacked the lack of any properly qualified evidence in relation to allegations of loss, and quantum of loss.  The allegations of interference can only be relevant (as was found to be arguable in the Edmond v Westland Bank case) if the defendant establishes that there was arguably an adverse effect from such conduct..  Mr Bowers noted the significance of the evidence of the real estate agent in the Edmond v Westland Bank case.  He noted the absence of any such evidence in support of the defendant’s opposition in this case.  Mr Kale’s evidence (paragraph

25) that “the value of the motel has been serious deflated after being advertised as

‘under receivership’” is an example of unqualified evidence.  It also suffers further fundamental difficulties in that the foundation of evidence to establish that the form of advertising occurred at the direction of South Canterbury does not exist.  On the facts, it suffers the further difficulty that the receivers have in the event refrained from selling the motel for the time being.

[54]     Thirdly, Mr Bowers came to what  I would categorise as his “so what?”

submission.    Mr  Bowers  characterised  many  of  the  allegations  as  containing

criticism of the conduct of South Canterbury (or the receivers) without that criticism then being logically linked by evidence to any consequence.

[55]     Mr Bowers’ criticism can be illustrated by reference to paragraphs 20 and 21 of Mr Kale’s evidence.  In paragraph 20 there is a criticism that the managers of the motel tried to alter bank account deposit details, with Mr Kale alleging that any banking operation should have only been done through a receiver.  Even assuming Mr Kale were qualified to make such a criticism and the criticism was sufficiently explained in detailed evidence, which I do not find, there is no consequence alleged to have flowed from the alteration.

[56]     In paragraph 21 Mr Kale alleges that South Canterbury “altered details on a purchase  and  sale  agreement  that  was  organised  through  the  receiver”.    This evidence again is without consequence in that the relevant agreement is not before the Court and Mr Kale does not in his evidence identify in any relevant way what the alteration of detail was.  Mr Bowers’ “so what?” submission then focuses attention on the fact that there is no alleged consequence to the alteration.  The evidence, to the contrary, is that no agreement for sale and purchase has eventuated.

[57]     By reviewing and analysing the Kale evidence against these three generic criticisms made by Mr Bowers, it is clear that none of the four key aspects of complaint made by the defendant amounts on the evidence to a tenable set-off or cross-claim.

[58]     Mr Holloway in his submissions preferred not to respond to the detail of the attacks on evidence made by Mr Bowers.  He accepted, and I quote, that “there are difficulties with the defendant’s evidence”.  Rather than focussing on the detail, he invited the Court to the view that the case when looked at in its totality should lead the Court to not have confidence in the defendant’s legal liability.

[59]     I reject Mr Holloway’s approach as an incorrect approach.  It is, of course, in the Court’s residual discretion to stand back and to look at the totality of the case. But a failure by the defendant to address in evidence the detail of its complaint or an

avoidance by counsel in submissions of addressing the detail of the evidence cannot alter the duty of the Court to examine critically the detail of the case.  In this case it is the detail of evidence (being admissible evidence) which is lacking.  The evidence is in key regards unspecific and imprecise.  In many cases it addresses aspects of a complaint but without addressing all elements (such as quantum) which would be necessary to establish arguably a legal complaint.

Agency

[60]     I mention the concept of agency for completeness.  It is not an express aspect of the defendant’s notice of opposition.  But an agency argument was explored by Mr  Holloway  in  his  submissions.    Mr  Holloway  argued  that  the  receivers  had become agents of South Canterbury and that South Canterbury was thereby tainted by the conduct of each receiver.  (In other words, this was a submission which went beyond Mr Kale’s allegations that South Canterbury had interfered – Mr Holloway was submitting that as a matter of law South Canterbury had become principal and the receivers agents).

[61]     For this proposition Mr Holloway centrally relied upon a clause in the GSA (cl 25(c)) which reads:

Any receiver appointed by the security holder…will be the agent of the party granting the security…

Mr Holloway’s written synopsis suggested that the contractual documents therefore made the receiver agent for South Canterbury as debenture holder, and not as agent for Buster.  Mr Bowers pointed out, correctly, that the wording of the GSA is in fact to the contrary – the receivers were appointed to be the agents of Buster, as the party granting security.

[62]     Responsibly, faced with Mr Bower’s submissions as to the true import of the GSA, Mr Holloway did not pursue further his submissions in relation to agency.  He left that area of the defendant’s opposition to stand or fall on the concept of South Canterbury having allegedly become responsible through actual interference (and by

that interference having become responsible for the conduct of the receivers as its agent).

Conclusion

[63]     I am satisfied that the defendant has no arguable defences to the plaintiff’s claims based on either set-off or cross-claim and that judgment should be entered for the plaintiff.

Stay

[64]     In the course of his oral submissions, Mr Holloway submitted that should the Court enter summary judgment, the Court should nevertheless stay execution of the judgment.

[65]     Mr Holloway did not refer directly to the jurisdictional basis upon which he invited the Court to act.

[66]     In view of the conclusions I have reached as to the failure of the defendant to establish an arguable set-off or cross-claim, I do not consider there is jurisdiction under r 12.12(2) High Court Rules.  As the commentary in McGechan on Procedure indicates (HR 12.12.02) the cases in which a stay of execution of a summary judgment  most  frequently arises  are  in  connection  with  counterclaims.    That  is because r 12.12(2) expressly allows judgment to be given on terms where it appears to the Court that the defendant has a counterclaim which ought to be tried.  That is not the case here.

[67]     The Court, however, retains an inherent jurisdiction to stay or dismiss a proceeding – r 15.1(4) High Court Rules expressly provides that the powers of stay under r 15.1 do not affect the Court’s inherent jurisdiction.

[68]     The significant feature of this case is that the management of the motel business  has  been  in  the  hands  of  receivers  for  seven  months.    The  receiver effectively controls the sales process and whether there is to be a sales process.  The business was purchased more than two years ago for $425,000.00 and the secured debt to South Canterbury is for $300,000.00 (before interest and costs).   While Mr Kale has not given any detailed evidence of his financial position, he has stated on oath that he cannot afford to meet the costs of his own defence.  It is also part of the evidence that he did not have the financial means to operate the running costs of the motel business without obtaining further working capital from South Canterbury. In these circumstances there is a basis to infer that the most likely source for funds to repay the South Canterbury debt lies in the realisation of the motel business.

[69]     Mr Bowers opposed a stay.  Mr Bowers submitted that in any case when, in the face of a plaintiff’s right to judgment, a stay is considered, the Court must require proper evidence as to the financial circumstances which the defendant maintains should  result  in  a  stay.    Mr  Bowers  identified  New  Zealand  Apple  and  Pear Marketing Board v Wallis (1990) 4 PRNZ 713 as an example of a case in which there was evidence establishing that the defendant’s liabilities exceeded his assets. The Court was therefore able to conclude that there would be every chance of a substantial miscarriage of justice occurring (in that case because a possible counterclaim could be cut across through execution of the judgment or even bankruptcy before a hearing was reached).

[70]     There is validity in Mr Bower’s criticism of the absence of detailed evidence of the defendant’s financial resources.  But there is at least an evidential foundation for an inference of unfairness should Buster and Mr Kale not be able to resort to the sale of the business in order to repay South Canterbury.  The plaintiff’s prima facie entitlement to proceed to execution can in these circumstances be met by the terms on which the Court might grant a stay.

[71]     As  I view  it,  Mr  Kale  effectively  invites  a  situation  where  the  receiver proceeds to sell the motel business now, in the winter, rather than have the receiver trade on with a view to sale at a time when the receiver might otherwise prefer.

Ultimately, that is a matter for the judgment and decision of the receiver.   But if Buster and Mr Kale are adamant as to their preference for a more or less immediate sale in order to discharge their judgment debt then the Court anticipates that if they were to provide the appropriate indemnities to the receiver the receiver may well be prepared  to  proceed  to  sale.    The  Court,  of  course,  has  no  evidence  as  to  the receiver’s  understanding  of  the  current  equity  of  the  business.    The  receiver’s position may be complicated by the significance in any drop in value of the business since it was purchased.

[72]     I am satisfied in these circumstances that it is just that there be a order of stay of execution until further order of the Court.  Such order is intended by its wording to be interim.  The intention of the order is to allow the defendant an opportunity to properly document his full financial position to South Canterbury and to explore with the receiver any submissions the defendant wishes to make as to the timing of the sale of the motel business.  The Court does not view that as a process that need take more than two or three weeks.  The Court anticipates that if the plaintiff is not satisfied with any arrangements that emerge from a two or three week consultation then the plaintiff will return to this Court for a removal of the stay.

[73]     As the stay is requested by the defendant essentially as an indulgence to meet his situation, all subsequent costs associated with the removal of the stay are likely to be dealt with in the same manner as I deal with costs below.

Costs

[74]     The  Court  is  entitled  to  award  indemnity costs:  r  14.6(4)(e)  High  Court

Rules.

[75]     Mr Holloway submitted in relation to costs that this has been a straight forward case of a plaintiff suing on a guarantee.   Mr Holloway observed that the defendant had made a without prejudice offer save as to costs to settle, but he did not

suggest that the defendant has ever offered to settle at the full amount of his liability as established through this proceeding.

[76]   On the other hand, the entitlement of the plaintiff under its contractual documents is to costs on a solicitor/own client basis.   Mr Bowers has provided a calculation to the Court, supported by affidavit evidence, of such costs and disbursements totalling $9,606.68.  The plaintiff sued on a guarantee but then had to meet a defence which asserted positive allegations of misconduct on the part of the plaintiff and the receivers.  The solicitor/client costs charged to South Canterbury in that regard appear reasonable on their face and have been supported by work in progress records which identify in an understandable way the work which had to be carried out by the lawyers.

[77]     There is no reason to cut across the contractual entitlement of the plaintiff in this case.

Orders - summary judgment

[78]     I order that there be judgment for the plaintiff against the defendant in the following sums:

Principal in the sum of  $260,000.00

Interest on the said principal of $260,000.00 from

1 December 2009 to the date of judgment                $   22,314.41

Principal in the sum of  $   40,000.00

Interest on the said sum of $40,000.00 at the rate

from 11 February 2010 to the date of judgment        $     2,531.51

[79]     In  addition,  I  order  that  there  be  judgment  for  the  plaintiff  against  the defendant as to disbursements and costs on a solicitor and client basis in a total sum of $9,606.68; interest on the said sum of $260,000.00 at the rate of 13.8% per annum from the date of judgment to the date of actual payment; and interest on the sum of

$40,000.00 at the rate of 15% per annum from the date of judgment to the date of actual payment.

[80]     The costs of any further steps in the proceeding are reserved.

Orders – stay

[81]     There will be a stay of execution of the judgment until further order of the Court on condition that the defendant shall refrain during the subsistence of the stay from disposing of any assets of himself or of entities within his control.

[82]     Independently of the condition attaching to the previous order, the defendant shall refrain until further order of the Court from disposing of any assets of himself or of entities within his control.

[83]     Leave is reserved to the parties on 48 hours notice to apply for cancellation or variation of the stay.

Acknowledgement

[84]     I acknowledge the succinctness and clarity of the submissions of counsel. Without detracting from the force of Mr Bowers’ submissions I particularly acknowledge  the  position  of  Mr  Holloway.    In  addressing  evidence  which  was lacking  in  areas,  he  made  such  points  as  were  properly  available  and  fairly recognised where his arguments met difficulties.  He did this in a context where on his own client’s evidence the defendant was not in a position to devote funds to the

proceedings.

Solicitors

Hamish Fletcher Lawyers, Nelson

Bamford Law, Nelson