Stevens v ASB Bank Ltd
[2012] NZCA 611
•20 December 2012
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA806/2011 [2012] NZCA 611 |
| BETWEEN GAVIN RAY STEVENS |
| AND ASB BANK LIMITED |
| Hearing: 17 September 2012 |
| Court: Arnold, Randerson and Miller JJ |
| Counsel: P F Chambers for Appellant |
| Judgment: 20 December 2012 at 11.30 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe cross-appeal is allowed. Summary judgment is entered for the respondent on the appellant’s counterclaim.
C The appellant must pay the respondent costs for a standard appeal on a band A basis together with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Arnold J)
Introduction
This is an unusual case. The respondent, ASB Bank Ltd (ASB), obtained summary judgment against the appellant, Mr Gavin Stevens, in respect of certain outstanding indebtedness. Mr Stevens raised a number of defences to ASB’s claim, which Associate Judge Doogue found could not succeed. Mr Stevens also raised the same matters by way of a counterclaim against ASB. The Associate Judge refused to grant ASB summary judgment on Mr Stevens’ counterclaim, however, holding that the test applicable to a defendant’s application for summary judgment was higher than that applicable to a plaintiff’s application for summary judgment.[1] This is one of the issues raised by the present appeal and cross-appeal.
Factual background
[1] ASB Bank Ltd v Stevens HC Auckland CIV-2011-404-1621, 11 November 2011.
The factual background is detailed and somewhat complex. Because we do not consider it necessary to do so, we will not traverse it in great detail.
Mr Stevens is a property developer. He and his brother, Mr Craig Stevens, trade through a partnership known as Cravin Holdings (Cravin). In addition, they were involved in a property development company, Frontier Properties Ltd (FPL). As at the end of 2007, Mr Stevens, Cravin and FPL had all borrowed funds from ASB. In particular:
(a)Messrs Gavin and Craig Stevens, as Cravin, had borrowed under a flexible finance facility against an “all obligations” first mortgage over a property at Fork Road, Kumeu (the Cravin facility).
(b)Mr Stevens and FPL had borrowed funds to purchase a property at Stanmore Bay, Auckland (the Stanmore Bay facility), secured by the existing Kumeu property mortgage and guarantees from Craig Stevens and a Mr Dye.
(c)Mr Stevens had a personal facility for $435,000 (personal facility).
On 1 April 2008, Mr Stevens’ personal facility and the Stanmore Bay facility expired. At that point, Mr Stevens and FPL were in default on the relevant loans. In July 2008, Mr Stevens approached ASB for further funding. Although ASB refused to advance further funds to Mr Stevens, it did provide re-financing under a facility agreement executed on 14 August 2008 (the 2008 facility). The borrowers were FPL and Mr Stevens, while his brother Craig and a Mr Dye were also parties, each having provided a guarantee and indemnity. The effect of the 2008 facility was that the ASB made available (a) a revolving credit up to $621,000, repayable on demand, and (b) a term loan of $3,384,000, which was to be repaid in March 2009. ASB had as security mortgages over various properties, including the Kumeu and Stanmore Bay properties, as well the guarantees and indemnities from Craig Stevens and Mr Dye.
The 2008 facility incorporated the ASB’s general terms and conditions. Relevantly, they provided:
4.4Payments to be Free and Clear: Each payment under any Document shall be unconditional and free and clear of any restriction, and shall be in full, without any deduction or withholding whatsoever (whether in respect of tax, set-off, counterclaim, charges or otherwise) unless such deduction or withholding is required by law.
…
17.1Set-Off: You irrevocably authorise us to apply (without prior notice or demand) any credit balance (whether or not due and payable) to which you are entitled on any account (in any currency) and at any of our offices, in or towards satisfaction of any indebtedness then due and payable by you to us but unpaid.
…
23.4Amendments: Except as otherwise agreed in these General Terms, no amendment to any Document will be effective unless it is in writing signed by all the parties to that Document.
23.6Waivers: No failure to exercise any right under a Document will operate as a waiver of that right. No waiver by us of our rights under a Facility Agreement or other Document will be effective unless it is in writing signed by us.
In September 2008, Mr Stevens sold the Kumeu property and paid the net proceeds to ASB, which used some of the funds to reduce Mr Stevens’ and Cravin’s indebtedness to it while ASB held the remainder ($343,000) on long term deposit in the name of Cravin, subject to a lien. Mr Stevens says that ASB did so contrary to an agreement he had reached with ASB following discussions with one of ASB’s managers, Mr Hunwick, on 12 September 2008 and says it was in breach of its obligations under cl 17.1 of the general terms and conditions. ASB denies that any such agreement was reached and denies any breach of cl 17.1.
When the term loan expired on 1 March 2009, it was not repaid. Subsequently some properties were sold and FPL and Mr Stevens obtained refinancing from another bank, which led to some reduction in the amounts owed under the term loan and the revolving credit facility. Having served various notices, including a notice under s 119 of the Property Law Act 2007 (PLA), ASB sold the Stanmore Bay property by mortgagee sale and applied the proceeds in reduction of the outstanding debt under the 2008 facility. A significant sum remained unpaid, however.
High Court proceedings
ASB issued proceedings against Mr Stevens to recover the shortfall owed under the 2008 facility and sought summary judgment. Mr Stevens sought to defend the summary judgment application on the basis that he had a set-off because:
(a)Contrary to:
· an agreement ASB had reached with him in September 2008; or
· a representation that it had made to him then; or
· an implied term in the loan contract;
ASB had applied proceeds from the sale of the Kumeu property to repay loans that were not due for repayment rather than to repay a term loan that was about to expire. As a consequence, Mr Stevens suffered financial loss through incurring liability for penalty interest.
(b)ASB breached its duties under the PLA in two respects. In relation to the mortgagee sale of the Stanmore Bay property, ASB breached the duty of care it owed him under s 176 in that it sold at an under-value. In addition, the notices of default served under s 119 were invalid because ASB was in breach of its contractual and other obligations to Mr Stevens.
Mr Stevens also brought a counterclaim making the same allegations as he had made in the context of his claimed set-off. ASB sought summary judgment on that claim as a counterclaim defendant[2] (or, in the alternative, a strike out).
ASB’s claim
[2] High Court Rules, r 12.2(2).
Associate Judge Doogue held that Mr Stevens had no defence to ASB’s claim. In relation to the alleged agreement, the Associate Judge considered that:
(a) Mr Stevens’ evidence of it was equivocal.
(b)It was not consistent with such contemporaneous documents as there were.
(c)The loan agreement between Mr Stevens and ASB provided that any amendment to them had to be in writing and signed by all the parties. The claimed agreement did not meet these requirements.
In relation to the alleged misrepresentation, the Associate Judge concluded that:
(a) Mr Stevens’ evidence about it was vague and equivocal; and
(b)it was also inconsistent with the only relevant contemporaneous document.
In relation to the alleged implied term, Associate Judge Doogue noted that it was a term to the effect that ASB would deal with Mr Stevens in a way that made commercial sense, which ASB had breached. The Associate Judge rejected the possibility of implying any such term, essentially because it would have been inconsistent with the express terms of the loan contract, in particular cl 17.1 (quoted at [5] above).
As to the alleged breaches of the PLA, the Associate Judge considered the affidavit evidence and noted the absence of particulars concerning the respects in which the sale process was alleged to be deficient. He concluded that the real estate agents who had handled the sale had made reasonable efforts to market the property and noted that the mortgagee sale had realised close to what the agents had advised it was likely to realise. Moreover, the Associate Judge noted that ASB had an incentive to realise as much as possible from the sale given the extent of Mr Stevens’ indebtedness to it. In relation to the s 119 point, the Associate Judge considered that it must fail given his findings on the alleged contract/representation/implied term claims.
Next the Associate Judge addressed an argument that ASB had breached the Credit Contracts and Consumer Finance Act 2003 (CCCFA), essentially for the reasons advanced in relation to the other set-off claims. He rejected it, on the basis that the particular loan was commercial in nature, so that the particular provisions of the CCCFA did not apply.
Finally, the Assocaite Judge noted the “free and clear” provision in cl 4.4 of ASB’s general terms and conditions. The Associate Judge accepted that the various contract/misrepresentation/implied term arguments could not be advanced in the face of this clause. He could see no reason why the clause should not operate in respect of the PLA claims, but did not finally determine the point. He did not deal with the effect of the clause on the CCCFA claim has he had held that it was unsustainable in any event.
In the result, then, the Associate Judge granted ASB summary judgment on its claim, on the basis that the defences raised were not arguable.
Mr Stevens’ counterclaim
Associate Judge Doogue dismissed ASB’s claim for summary judgment on Mr Stevens’ counterclaim against it in the following terms:
[70] The issue that arises is not the exact reverse of the matter considered on the plaintiff’s application, which is whether the defendant has an arguable defence. In such a case, the court evaluates the evidence and comes to a conclusion generally expressed in terms of probability or likelihood as to whether the matters advanced by the defendant could be accepted by the court at trial. An application for summary judgment against a (in this case, counterclaim) plaintiff under r 12.2(2) seems to me to impose a rather stricter requirement. It may be unlikely — even very unlikely — that the defendant’s claim will succeed and yet the court still might not conclude that it is the type of claim that cannot succeed. This is not a case where the plaintiff can claim to have an incontrovertible “king hit”-type answer to the defendant’s counterclaim.
Basis for appeal and cross-appeal
Mr Stevens has appealed against the Associate Judge’s decision to grant summary judgment against him on ASB’s claim; ASB has cross-appealed on the Associate Judge’s decision to refuse to grant summary judgment in their favour on Mr Stevens’ counterclaim.
For Mr Stevens, Mr Chambers argued that Associate Judge Doogue was wrong in a number of the statements he made as to the facts. He also argued that the Associate Judge had erred in saying that Mr Stevens had not provided particulars to support the alleged agreement/misrepresentation. He accepted that Mr Stevens’ claim may require re-pleading, but said that there were points of substance to it that required determination after trial. He emphasised in particular cl 17.1 of ASB’s general terms and conditions. He said that ASB was obliged to utilise the funds that had been made available after the sale of the Kumeu property to reduce indebtedness rather than simply holding them on term deposit to apply against interest payments as they became due in the future. Mr Chambers accepted that Mr Stevens did not ask ASB to use the balance to reduce debt but said that ASB has a contractual obligation to do so. He also submitted that the claim under s 176 of the PLA was arguable on the material before the Court. Other points mentioned in his written submissions were not pursued orally.
For ASB, Mr Kennedy submitted that the various defences raised by Mr Stevens were not arguable as a matter of fact and even if they were, could not be maintained in the face of the “free and clear” clause in ASB’s general terms and conditions (cl 4.4). He pointed to evidence that indicated Mr Stevens had both consented to and co-operated in ASB holding some of the funds on term deposit to meet future expenses. On the cross-appeal, Mr Kennedy argued that the Associate Judge was wrong to decline to enter summary judgment for ASB on Mr Stevens’ counterclaim as the relevant tests were conceptually equivalent and should have produced the same outcome on these facts. Even if the standards were different, summary judgment should still have been entered in ASB’s favour given the factual findings.
Evaluation
Appeal
As we have said, Mr Chambers sought to persuade us that there were disputed factual matters such as to make it inappropriate for Associate Judge Doogue to have granted summary judgment to ASB on its claim against Mr Stevens. He also submitted that the Associate Judge had made material errors as to the facts. We do not accept these submissions.
We will not address the evidence and arguments on this aspect in any detail as we consider that there are two compelling points indicating that the Associate Judge was right in the conclusion that he reached.
The first point is that the account that Mr Stevens gives of the effect of the discussions he had with representatives of ASB is not supported by the contemporary material. In particular, the document which formed the basis for discussion at the meeting of 12 September 2008 contained two alternative proposals. We set the document out in full:
STEVENS — SECURITY — 12 September 2008
Stevens G & C Group
‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑‑
Current Proposed
Security
161 Maungatawhiri Rd, Raglan (RV 8/07) 1,067 60% 640 640
Sunnyside Rd, Coatsville (RV 8/07) 1,750 50% 875 875
Fork Rd, Kumeu (GV 8/07) 1,200 50% 600 –
156 Brightside Rd, Stanmore Bay (PP 9/07) 3,734 70% 2,614 2,614
7,751 4,729 4,129
Facilities
G R & C W Stevens t/a Cravin Holdings
CFFF 12-3039-0104812-00 150
G Stevens & Frontier Properties Ltd
TLN 12-3109-0035307 3,384 3,219
CFFF 12-3109-0035307 (Capitalising Interest) 621 621
G Stevens
TLN – 12-3039-0099216-00 __435 ____
4,590 3,840
_____ ____
Scaled Security Surplus / (Deficit) 139 289
LVR 59% 59%
Req Proposed Alt Proposed
| Debt Reduction | 365 | 600 | 440 |
| GST | 105 | 105 | 105 |
| Craig | 300 | 140 | 140 |
| Craig TRUST DEED | 160 | ||
| Gavin | 125 | 50 | 50 |
| Buffer | 30 | 30 | 30 |
| 925 | 925 | 925 |
On its face, then, the document did not record an agreed position, simply two alternative proposals. The evidence of the ASB representatives at the meeting was that no agreement was reached. This is supported by the (admittedly limited) contemporaneous documents, which indicate that there were at least two subsequent meetings on 17 September and 1 or 2 October 2008, at which the discussion of possible arrangements continued. At the latter meeting, ASB representatives asked Mr Stevens to provide further information in relation to the costs of completing certain development work. ASB says that Mr Stevens never provided that further information, although the reason for that may be that Mr Stevens considered that he had already provided it. In any event, from ASB’s perspective at least, steps remained to be taken.
Further, Mr Stevens’ solicitors drafted a letter to go to ASB recording Mr Stevens’ position as at 8 October 2008. It refers to the “proposal” made by ASB on 12 September 2008 and says:
15.As agreement was not able to be reached on [12 September 2008], and as [Mr Stevens] was travelling to Australia, it was agreed that the full net funds would be held in a deposit account in [ASB] pending agreement on the proposal.
The letter goes on to say:
19.We consider that [ASB] is bound by the loan facility agreement and proposal submitted on 12 September 2008 and made in connection with those documents.
The letter does not, however, point to anything that happened after 12 September and before 8 October that converted the proposal into a binding agreement. As we have just said, the contemporaneous documents indicate that there were at least two further meetings, but no conclusion was reached.
This draft letter was not sent, not apparently because Mr Stevens disagreed with its contents but for other reasons. However, we think it lends support to ASB’s position that no agreement was reached on 12 September 2008 of a sort that would bind ASB.
The second point is that the claims made by Mr Stevens are inconsistent with the “free and clear” and “no amendment unless in writing” clauses in ASB’s general terms and conditions, set out at [5] above. As Mr Kennedy submitted, in Air New Zealand Ltd v Nippon Credit Bank Ltd this Court declined to give effect to what was argued to be an oral variation of contract in the face of a “no variation unless in writing” clause.[3] If the parties had intended to bind themselves to some new arrangement, we have no doubt that ASB would have documented that appropriately. In the absence of such documentation, we see no justification for going behind these plainly worded provisions, which are intended to prevent the uncertainty and dispute that so often arises where written agreements are said to have been varied orally.
[3] Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218 (CA) at 227.
In relation to the argument based on cl 17.1 of ASB’s general terms and conditions, we accept Mr Kennedy’s point that cl 17.1 allows, but does not require, ASB to apply funds to satisfy other indebtedness. We agree with his submission that the evidence shows that the funds were put on term deposit at the request of Mr Stevens, initially, it seems, as a holding device. Payments were made from the funds to the Inland Revenue Department and for invoices at Mr Stevens’ request, as the contemporaneous documents show. The remaining funds were utilised to pay the interest on the term loan,[4] with Mr Stevens’ approval, until the funds were exhausted in September 2009. We do not accept that there is an arguable case that ASB acted wrongly in this respect.
[4] See [4] above.
In relation to the argument that ASB breached its obligations under s 176 of the PLA in selling the Stanmore Bay property, we agree with the findings of the Associate Judge, for the reasons he gave. The evidence shows that ASB engaged a reputable firm of real estate agents, Barfoot & Thompson, to market the property. The marketing strategy included extensive newspaper advertising and multiple open homes. There were 37 buyer inspections, which produced six tenders. The highest tender was accepted. Although there were earlier valuations that gave the property a higher value than the amount realised on the mortgagee sale, the price achieved was in accordance with the agents’ pre-sale estimate on a forced sale in the then-existing market conditions. We do not see that there was anything else that the agents, or ASB, might reasonably have been expected to do.
For completeness, we note that the point concerning the inadequacy of the PLA notices was not pursued in oral argument. But it leads nowhere in any event. This is because, as the Associate Judge noted, the alleged invalidity of the notices depends on ASB being found to have breached its contractual or other obligations, allegations which we consider have no prospect of success.
Accordingly, we consider that Associate Judge Doogue was right to grant ASB summary judgment on its claim against Mr Stevens.
Cross-appeal
In Jones v Attorney-General,[5] the Privy Council approved the observations of this Court in Westpac Banking Corporation Ltd v M M Kembla New Zealand Ltd[6] concerning the proper approach to defendants’ applications for summary judgment. In Kembla, the Court had pointed to two important differences between a plaintiff’s application for summary judgment and that of a defendant. The first is that a defendant must satisfy the court that the plaintiff cannot succeed on any of its causes of action.[7] The second is that, besides seeking summary judgment, a defendant has the ability to apply to strike out a plaintiff’s proceedings, which will be assessed essentially on the basis of the pleadings.[8] The Court then said:
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and legal issues. …
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff’s case prematurely before completion of discovery or other interlocutory steps and before the plaintiff’s evidence can reasonably be assembled.
[5] Jones v Attorney-General [2004] 1 NZLR 433 (PC) at [5].
[6] Westpac Banking Corp Ltd v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
[7] At [59].
[8] At [60].
Associate Judge Doogue found, correctly in our view, that the defences advanced by Mr Stevens in respect of ASB’s claim against him could not succeed. Accordingly, he granted summary judgment against Mr Stevens. Mr Stevens raises the same matters in his counterclaim. Given that the Associate Judge concluded that he could safely determine the viability of Mr Stevens’ defences on the material before him, we consider that he should also have determined the viability of Mr Stevens’ counterclaim against ASB on that same material. We see this as falling within [62] of Kembla, that is, this is a case where it can safely be concluded on the basis of the documents and affidavits before the Court that Mr Stevens’ counterclaim, like his defences, cannot succeed.
Accordingly, we consider that the Associate Judge should have granted ASB summary judgment on Mr Stevens’ counterclaim.
Decision
We dismiss the appeal.
We allow the cross-appeal and enter judgment for the respondent on the appellant’s counterclaim against it.
The appellant must pay the respondent costs for a standard appeal on a band A basis, together with usual disbursements.
Solicitors:
Henley-Smith Law, Auckland for Appellant
Minter Ellison Rudd Watts, Auckland for Respondent
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