Southrim Limited v Burmester HC Christchurch CIV-2011-409-000545

[2011] NZHC 833

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-000545

BETWEEN  SOUTHRIM LIMITED Plaintiff

AND  PHILLIP ROGER BURMESTER Defendant

Hearing:         1 August 2011

Counsel:         D M Lester for Plaintiff

G A Cooper for Defendant

Judgment:      4 August 2011

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      On 16 September 2010 the plaintiff advanced to the defendant the sum of

$25,000.  On 11 October 2010 it advanced to the defendant a further $25,000.  The defendant has not repaid to the plaintiff any part of the total sum of $50,000.  On 25

January 2011 the plaintiff demanded repayment by 31 January.  A further demand was issued, and the deadline for repayment extended, later, to 31 March 2011.  The plaintiff  has  applied  for  summary  judgment  for  $50,000  plus  interest  at  the Judicature Act rate from 31 March 2011.

[2]      The defendant opposes the entry of summary judgment on the basis that he has a defence to the plaintiff’s claim.  His case is that the sums he received were not loans but part payments of a sum owing by the plaintiff to the defendant under a joint venture agreement.  The defendant alleges that the plaintiff breached that agreement and breached fiduciary obligations it owed to him in relation to the joint venture

agreement.

SOUTHRIM LIMITED V PHILLIP ROGER BURMESTER HC CHCH CIV-2011-409-000545 4 August 2011

Principles applying to applications for summary judgment

[3]      Where a plaintiff applies for summary judgment the onus of satisfying the Court that the defendant does not have an arguable defence rests at all times on the plaintiff.[1]     That said, however, where a defendant alleges that it has an arguable defence, it is for the defendant to lay an evidentiary foundation from which the Court can determine whether there is or is not an arguable defence.[2]

[1] Ancutt v Falvey HC Wellington CP 296/86, 20 August 1986, Eichelbaum J

[2] MacLean v Stewart (1997) 11 PRNZ 66 (CA)

[4]      In  this  case  the  following  principle  also  falls  for  consideration:  in  The

Attorney General v Rakiura Holdings Ltd,[3] Greig J said:

[3] The Attorney General v Rakiura Holdings Ltd (1986) PRNZ 12 at page 14

In a matter such as this it would not be normal for a judge to attempt to resolve any conflicts in evidence contained in affidavits or to assess the credibility or plausibility of averments in them.   On the other hand, in the words of Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331, at

341 E, the judge is not bound:

to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision,  inconsistent  with undisputed  contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.

Relevant facts

[5]      The director of the plaintiff is Mr Wayne Tobeck.  In May 2010 he and the defendant discussed a possible business venture.   At that time Mr Tobeck had an engineering business in Thailand.  In his affidavit Mr Burmester deposed that he told Mr Tobeck that he was a shareholder and agent of a Christchurch company that was bringing into New Zealand a Flat Pac housing system from Korea.  This is a form of kitset housing manufactured overseas and imported into New Zealand in a box ready to assemble.  Mr Tobeck denied that he was informed of this.  Whether he was or was not, the parties proceeded to discuss a business venture whereby coastal sections would be obtained from financially distressed developers, banks and other parties at low prices, and imported Flat Pac houses would be built on them, with the completed

properties sold at a profit.   It seems that Mr Burmester maintained that he could

obtain substantial numbers of sections from various sources at prices thought to be below market, and on favourable conditions.

[6]      During  the  succeeding  months  there  were  ongoing  negotiations  about whether, and if so how, the parties would enter a business venture together along the lines outlined.  In October Mr Tobeck and Mr Burmester went to Thailand together, because part of the discussions involved Mr Tobeck’s Thai company participating in this venture.  Shortly before this trip, the advances in issue in this proceeding were made.

[7]      It  is  Mr  Burmester’s  position  that  it  was  agreed  that  he  would  be  paid goodwill for his contribution to the venture.  As he put it “A figure of $100,000 was mentioned for my goodwill”.  He also said that “The paperwork in relation to this payment was never completed by the parties”.  Certainly, no documented record of the loans was produced, apart from entries in the plaintiff’s bank account showing that the advances were in fact made.

[8]      Conversely, the plaintiff maintains that the advances were simply loans made at the request of Mr Burmester, it was never agreed that there would be any payment to Mr Burmester for goodwill, and that he was not at any relevant time the holder of any rights in relation to Flat Pac at all.

[9]      In support of this point the plaintiff produced to the Court documents that show that a company called Portable Infrastructure Limited is the distributor in this country of Flat Pac products pursuant to a head licence from Ace Engineering & Co Limited of Seoul, South Korea.  Mr Burmester is not a director of that company, nor at the time of his early conversations with Mr Tobeck did he apparently have any rights in relation to this product.   A distribution agreement with Portable Infrastructure Limited was signed by Mr Burmester’s company, Canterbury Land Resources Limited in January 2011, and was operative from 1 October 2010.

[10]     Mr Lester also pointed out that in his affidavit Mr Burmester deposed that Canterbury Land Resources Limited is a holding company, and it was never intended that  that company was to  be  part  of the  joint venture.    He  submitted that  any

goodwill arising from the distribution agreement would belong to Canterbury Land Resources Limited, not Mr Burmester who was not a party to it, and the rights of the company could not be assigned without the consent of Portable Infrastructure Limited.   Thus, on Mr Burmester’s evidence, any goodwill owned by Canterbury Land Resources Limited was not going into the joint venture in any event.

[11]     In December the plaintiff produced a draft joint venture agreement.  Despite requests by the plaintiff, it was not considered by Mr Burmester or his solicitor before Christmas.

[12]     Another  possible  party to  the proposed joint  venture  was a  Christchurch architect.  On 20 January 2011 Mr Burmester informed him that he and Mr Tobeck had parted ways.  From that point on, a number of events took place, and documents were created, which are relevant to whether the advances were simply loans or were part payment for goodwill.

[13]     On the same day there was evidently a meeting between Mr Burmester and a Mr Rollo who is a financial officer in Mr Tobeck’s business and in an email sent on that day to Mr Burmester, referring to that meeting, Mr Rollo recorded that they had discussed this issue, that it was Mr Burmester’s wish to go his own way and that as a result, he did not require any further meetings to take place.  Mr Rollo then recorded as follows:

Other issues discussed:

•     Phil, yourself and Donna will leave the offices by the end of next week.

•     The NZ$50,000 loan will be repaid by the end of next month (28/2/11).

•      The 2 x grey boxes will be returned to Heckler at no cost to Southrim and we will terminate the warehouse lease at some stage in the near future.  Any ongoing costs associated with either of these will be split between the parties.

[14]     The first bullet point refers to the fact that Mr Burmester had moved into the plaintiff’s offices, temporarily, after the earthquake in Christchurch in September. The reference in the third bullet point was not directly explained but appears to relate to imported housing componentry stored at the plaintiff’s premises.   The crucial

bullet point, however, for present purposes, is the second.  It indicates, assuming it to be accurate, that at the meeting repayment of the sum of $50,000 in issue in this case was discussed and a repayment date was set.

[15]     The email went on to indicate that Mr Rollo would prepare an invoice for a split of costs incurred to date, a reference to the costs of the proposed joint venture which was not to proceed.  Mr Burmester was asked to advise costs which he wished to have considered, so these could be balanced between the parties.  Subsequently an invoice has been sent to Mr Burmester, to which he has taken some exception. Mr Burmester did not reply to this email.

[16]     Mr Rollo also sent an email to Mr Tobeck reporting that he had had a meeting with Mr Burmester, which was very brief, resulting in Mr Burmester agreeing to leave the office at the end of next week.  The email also recorded that Mr Burmester had agreed to repay the sum of $50,000 at the end of the next month, once a property sale settled.

[17]     On 25 January the plaintiff sent Mr Burmester an invoice for 50 per cent of the direct expenses incurred on the venture, amounting to $89,936.94.  The same day a demand for repayment of the sum of $50,000 was made, with payment required by

31 January 2011.

[18]     On 28 January 2011 Mr Tobeck wrote to Mr Burmester referring to a brief conversation  between  Mr  Burmester  and  Mr  Rollo  that  day  from  which  he understood  that  the  plaintiff  would  receive  a  letter  from  Mr  Olly  Matson,  the solicitor for the defendant, the following week “confirming that the NZ$50,000 personal loan to yourself will be paid prior to 28 February 2011.”  The letter went on to refer to reimbursement of expenses.

[19]     On Sunday, 30 January at 10.41 am Mr Tobeck emailed Mr Burmester asking him whether he was available to meet to resolve their differences, and suggesting that they meet for a coffee or a drink at the office.  A few minutes later Mr Tobeck sent  another  email  suggesting  they  meet  in  the  coming  week  as  he  would  be travelling away for about two weeks after that.

[20]     At 8.06 am on Monday, 31 January, Mr Burmester emailed Mr Tobeck to say they could catch up later that morning, perhaps over coffee.  At 8.22 am Mr Tobeck agreed suggesting 11.45 am at a stated venue.  Mr Burmester emailed back agreeing.

[21]     At 9.04 am Mr Tobeck sent Mr Burmester a longer email suggesting topics that he believed they should discuss.   One of them was “personal loan $50K,  - documentation or payment”.

[22]     Evidently  the  meeting  took  place  because  at  1.05  pm  Mr  Tobeck  again emailed Mr Burmester thanking him for taking the time to meet and expressing his understanding of the matters agreed and discussed. A number of issues were covered including agreement that Mr Rollo would provide a breakdown of the claim for expenses, but in relation to the $50,000 the email records “You are happy to sign documentation for the loan and make good on payment.”   Mr Burmester did not reply to this email.

[23]     That afternoon Mr Rollo sent Mr Burmester a breakdown of the expenses, and the following afternoon sent him an email asking him to advise, as he put it:

the status of outstanding payments – both the personal loan which you promised a formal undertaking with a firm payment date and the outstanding invoice.  The expense breakdown was sent through yesterday and I have not had a response updating a firm payment date for this.

Mr Burmester did not reply to this email.

[24]     On  Friday,  4  February,  Mr  Rollo  emailed  Mr  Burmester,  referring  to  a telephone discussion, and recording that Mr Burmester would be meeting Olly Matson over the weekend to discuss the various outstanding issues, including the outstanding invoice for reimbursement of expenses, “and the repayment of the loan”.

[25]     At  10.13  pm  on  Sunday,  6  February,  Mr  Burmester  sent  an  email  to Mr Tobeck, in vituperative terms.  Most of the email was directed at the claim for expenses, and other matters which are not relevant to the issue in this application. However, on the matter of the advances, he said:

Firstly, would I have agreed to personally underwrite expenses when you had advanced me 50k?

[26]     Mr Tobeck sent a response the next morning but did not make any reference, specifically, to the sum of $50,000.  The following day, 8 February, Mr Rollo sent Mr Burmester another demand letter in relation to the sum of $50,000.  Payment was required by 15 February 2011.

[27]     On 18 February 2011 Mr Matson sent an email to Mr Rollo in the following terms:

Hi Simon,

I confirm I have a little over 45k in cleared funds and am expecting the balance shortly.   I am instructed to pay the funds over once Phil has been permitted access to the office to collect his personal items.   Please liaise direct with him as to arranging a mutually convenient time.

Please also let me have bank account details including account name.

[28]     Mr Rollo replied on Monday, 21 February:

Hi Olly

Thank you for your email, we have had no response from Phil to the letter sent.  Bank account details have been provided on the letter attached.

Regarding Phil’s personal items, Phil can pick these up any time during normal business hours.  Phil has never been denied access to collect these, no request has ever been made.

I will wait for Phil to contact me direct to arrange a suitable time.

[29]     The   following   day   there   was   a   major   earthquake   in   Christchurch. Subsequently the plaintiff agreed to extend time for repayment to 31 March.

Discussion

[30]     In this case it is necessary to determine whether Mr Burmester has raised an arguable defence that the sum of $50,000 was an advance on account of a payment for goodwill under the proposed joint venture.  Necessarily, therefore, it involves an assessment of the credibility of his evidence.   I do so with caution, noting the

passage  from  the  judgment  of  Lord  Diplock,  cited  by Greig J  in  The Attorney

General v Rakiura (above).

[31]     The  evidence  in  favour  of  Mr  Burmester’s  version  of  events  can  be summarised in two propositions.  First, there is, perhaps, an inherent improbability in the plaintiff having advanced the sum of $50,000 to the defendant just four months or so after they met, on an unsecured basis and without documentation or even an agreement on a term of a loan.  Such action might be seen to be more consistent with an advance payment on a business obligation arising from the discussions which were then underway.

[32]     Secondly, Mr Burmester has sworn on oath that one term of the joint venture agreement in contemplation was that Mr Tobeck and/or the plaintiff would pay him for his goodwill “of the time I had spent working on the Flat Pac concept and business plan” and further “a figure of $100,000 was mentioned for my goodwill”. On this point I am mindful of two issues.   The first is that when this took place Mr Burmester was not the holder of any rights at all in relation to Flat Pac.  Rights were not finalised until some months later, their commencement date was not until at least a number of weeks later than the time when these conversations took place, and the rights are held by Canterbury Land Resources Limited which Mr Burmester deposed were not to be a party to the proposed joint venture.  Secondly, given that Mr Burmester maintains that he was advanced the sum of $50,000 on account of an agreed $100,000 goodwill payment, his description of it is scant indeed. At no point does he say that a figure of $100,000 was agreed, only that it was mentioned.

[33]     On the other hand, there are a number of factors which either do not reflect well on the defendant’s case, or directly support the plaintiff’s case.  In the former category,  I  refer  to  two  matters,  the  first  in  paragraph  38  of  Mr  Burmester’s affidavit.  There he expresses a belief that Mr Tobeck and the plaintiff are attempting “to force me out of the joint venture agreement” by demanding repayment of the sum of $50,000.  In fact, the documents before me show that the defendant pulled out of the joint venture agreement on 20 January before any formal agreement was signed, and without any prior indication that this would occur.  At no subsequent point has there been any suggestion that the joint venture agreement was continuing

beyond that date, so his statement on 7 June 2011 when he swore his affidavit is difficult to accept.

[34]     Secondly, Mr Burmester stated in his affidavit that he informed Mr Tobeck in May 2010 that he was a shareholder and agent of a Christchurch company that was bringing in the Flat Pac housing system from Korea, which was later developed into the business proposal between the plaintiff and the defendant.  As recorded in paragraph [9] above, that was not correct.  Accepting his evidence, therefore, would necessarily lead to the conclusion that he told Mr Tobeck an untruth.   Mr Tobeck could not recall him saying this, so I make no finding on whether this statement was made or not.  The relevance here is that Mr Burmester’s own evidence laid claim to an untrue position.

[35]     I turn  now to  factors which  support  the  plaintiff’s case.    Earlier  in  this judgment I have set out in detail the documentary record of discussions between Mr Tobeck, Mr Rollo and the defendant.  These demonstrate agreement on the part of the defendant to repay the sum of $50,000 and, of equal importance, fail to mention at all the position now taken by the defendant on the status of this sum of money.  On the information before me, the first mention of the defendant’s present contention was made in his affidavit filed in opposition to this claim for summary judgment.

[36]     Of all the documentary records to which I have referred, the plaintiff laid the greatest emphasis on the email from Mr Matson dated 18 February, three days after the final date for repayment of $50,000 in accordance with the demand of 8 February

2011, advising Mr Rollo that he had a little over $45,000 in cleared funds, was expecting the balance shortly, and was instructed to pay this sum once his client had been permitted access to the office to collect his personal items.  Mr Burmester did not produce this email, nor explain it.  It is not consistent with the stance he now takes, nor are the other documents recording agreements by him to repay the sums claimed.

[37]     In  submissions  Mr  Cooper  referred  to  Baverstock  Developments  Ltd  v

Housing New Zealand Ltd.[4]   He submitted on the authority of this case that if there is

an arguable defence a solicitor’s letter offering to pay a sum of money in settlement will not negative that defence.  I do not consider this assists the defendant.  First, the case is not authority for a general proposition: it is based entirely on its own facts, the letter in question and the context in which it was written.  Secondly, Mr Matson’s email  was in  my view a  clear  statement  that  the  debt  would  be  met.    Neither Mr Burmester nor Mr Matson gave evidence seeking to explain it any other way, nor is there any suggestion on the evidence that payment was being made despite there being no liability to do so.  Mr Cooper submitted the letter showed Mr Burmester just wanted to walk away and not to fight.  There was no hint of that position in the evidence.

[4] Baverstock Developments Ltd v Housing New Zealand Ltd HC Auckland CIV-2009-404-4917

Associate Judge Robinson, 19 November 2009.

[38]     Although hesitant to resolve conflicts on the evidence on an application for summary judgment, I find Mr Burmester’s evidence implausible.  In the ways I have described, it lacks precision.  It is inconsistent with undisputed contemporary records of  conversations he  has had  with  officers of  the  plaintiff company,  and  with  a statement by his solicitor, said to be on his behalf.  I therefore find that the sum of

$50,000 advanced by the plaintiff to the defendant was not part of any agreement that it be part of a goodwill payment to him for a possible joint venture agreement which was then under discussion, and that it was simply an advance in respect of which the plaintiff is entitled to demand repayment.

[39]     Counsel  for  the  defendant  submitted that  should  I make this finding the Credit Contracts and Consumer Finance Act would apply; consequently disclosure would be required under the relevant sections of that Act, and has not been made, with the further consequence that no enforcement steps may be taken unless and until that disclosure is given (s 99).

[40]     Two difficulties lie in the way of this  submission.   First, no evidentiary foundation was laid by the defendant for the proposition that the plaintiff is a lender to which the Act applies, nor did counsel develop this in his submissions.  Secondly, this potential ground of defence was not raised in the notice of opposition and appeared for the first time in counsel’s submissions.  This is not permissible with out leave, and Mr Lester opposed leave being granted.   It is not appropriate to grant leave. This submission is therefore rejected.

[41]     As  noted  in  paragraph  [2],  the  defendant  also  alleged  that  the  plaintiff breached  a  joint  venture  agreement  between  the  plaintiff,  the  defendant  and Mr Tobeck.    The  evidence  did  not  establish  an  agreement  was  reached  before Mr Burmester ceased discussions in January 2011 – quite the reverse, there was only a draft agreement document in loose terms at that point.  Mr Burmester did express his views on how and why the relationship between the parties cooled after the visit to Thailand, but the evidence fell well short of establishing an arguable defence on this basis.

[42]     For these reasons I find that the defendant does not have an arguable defence

to the plaintiff’s claim for summary judgment.

Outcome

[43]     I enter summary judgment for the plaintiff against the defendant in the sum of

$50,000, together with interest under the Judicature Act until the date of payment. The plaintiff sought interest from 31 March; the defendant submitted that as the final date for payment under the last demand was 6 May, interest should run from that date.  Mr Lester accepted this. Accordingly I direct that interest will run from 6 May

2011 until payment.

[44]     The plaintiff will have costs on a 2B basis with disbursements fixed by the

Registrar.

J G Matthews

Associate Judge

Solicitors:

Layburn Hodgins, PO Box 795, Christchurch (Solicitor – Richard Maguire) (Counsel – Dale Lester Barrister, PO Box 825, Christchurch) for Plaintiff Wynn Williams & Co, PO Box 4341, Christchurch

(Solicitor – J V Ormsby -  [email protected]) (Counsel – G A Cooper – [email protected])