Strategic Finance Limited v Henderson HC Christchurch CIV 2009-409-1731
[2010] NZHC 1488
•16 August 2010
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2009-409-001731
BETWEEN STRATEGIC FINANCE LIMITED Plaintiff
ANDDAVID IAN HENDERSON Defendant
Hearing: 16 August 2010
Appearances: M J Tingey and NFD Moffatt for Plaintiff
A J Forbes QC and K W Clay for Defendant
Judgment: 16 August 2010
ORAL JUDGMENT OF HON. JUSTICE FRENCH
[1] Strategic Finance Limited seeks summary judgment against Mr David
Henderson under a guarantee. The application is opposed.
Factual background
[2] Strategic was the holder of second and fourth ranking registered mortgages over a property situated at 16 Emerald Hill, Havelock North. The property was owned by Alan Duff Productions Limited.
[3] In 2007 Mr Duff and his company fell into serious financial difficulty. A mortgagee sale at the instance of the first mortgagee was looming. This would have been to the detriment of Mr Duff and Strategic. Mr Henderson is a long-standing friend of Mr Duff, and Mr Duff went to him for help. An agreement was reached between Mr Duff, Mr Henderson and Strategic that Strategic would fund one of Mr
Henderson’s companies to purchase the property so that renovations could be
STRATEGIC FINANCE LIMITED V HENDERSON HC CHCH CIV-2009-409-001731 16 August 2010
completed and the property later sold in an orderly sale. That way Strategic would stand a better chance of recovering the money it had lent Mr Duff’s company, which in turn would be of obvious benefit to Mr Duff.
[4] On 14 December 2010 Strategic entered into a loan agreement with Cleaver Factors Limited, the entity selected by Mr Henderson. Under the loan agreement, Strategic agreed to lend Cleaver a maximum of $2,035,000 plus capitalised interest and fees. The loan was secured by a first mortgage over the property and an all obligations personal guarantee signed by Mr Henderson. Clause 2.2 of the guarantee provided:
2.2 Payment
The Guarantor undertakes to Strategic that if, for any reason, the Debtor does not pay when due (whether by acceleration or otherwise) any Guaranteed Indebtedness, he will pay the relevant amount to Strategic immediately on demand.
[5] Unfortunately, the renovations were never completed and Mr Duff vacated the property in or about mid-2008.
[6] Under the terms of the loan agreement, Cleaver was required to repay the loan on 14 December 2008, but failed to do so. Strategic made demand on Cleaver and Mr Henderson in December 2008 for the money then outstanding ($2,339,711). When payment was not forthcoming, Strategic served Cleaver with a notice under s
119 of the Property Law Act 2007 on 19 January 2009 and a notice under s 122 on
Mr Henderson on 26 January 2009.
[7] On 13 June 2009 Strategic sold the property at auction for $920,000.
[8] On 23 July 2009 it issued the current proceedings against Mr Henderson to recover the shortfall, relying on its guarantee.
[9] The first call of the summary judgment application was on 21 September
2009. Then followed a series of adjournments (5 October 2009, 2 November 2009,
14 December 2009). Sometime in October 2009 Mr Henderson signed a deed of
acknowledgement of debt. The deed is attached as Schedule A. Its operative provisions state:
The Guarantor hereby irrevocably admits that:
1. The Guarantor is liable to the Lender under the Guarantee for the Principal plus interest of 23% per annum as per the terms of the Guarantee.
2.The judgment sum of $2,650,147.79 as claimed in the Statement of Claim filed in proceeding CIV 2009-409-1731 (the Judgment Sum) accurately reflects the amount owed by the Guarantor to the Lender on 22 June 2009. The Guarantor has no defence to the claim set out in the Statement of Claim filed in the proceeding CIV 2009-409-
1731 (the Proceeding) and he undertakes not to file any defence to this claim in the Proceeding.
…
5.The Guarantor has no counterclaim, set-off or cross-demand of any nature in respect of the debt due to the Creditor, and undertakes that he will not seek to raise any counterclaim, set-off or cross-demand against the Lender in the Proceeding or otherwise.
[10] Settlement discussions took place, but failed to resolve the matter.
[11] Strategic then advised Mr Henderson on 8 December 2009 that it intended to proceed with its summary judgment application. Mr Henderson sought and was granted leave by an Associate Judge to file a notice of opposition.
[12] The grounds of opposition are essentially two-fold:
i)That Strategic’s chief executive officer, Mr Finnigan, represented to Mr Henderson he would have no personal liability, and in those circumstances:
1. It would be unfair and unconscionable for Strategic to enforce the guarantee;
2. Mr Henderson was induced to enter into the guarantee by oppressive means and Strategic is exercising its rights under the guarantee in an oppressive manner contrary to
the provisions of the Credit Contracts and Consumer
Finance Act 2003;
3. Strategic misrepresented the position to Mr Henderson in breach of ss 9 and/or 13 of the Fair Trading Act 1986, and/or s6 of the Contractual Remedies Act 1979.
ii) Strategic has failed to comply with the requirements of
Westpac v Cooper HC Auckland CIV-2009-404-000990, 29
January 2010, Duffy J in that it has failed to plead and provide evidence proving it has discharged its duty to achieve the best possible price at the mortgagee sale.
[13] In support of his notice of opposition, Mr Henderson has sworn two affidavits. He says that at a meeting on 7 December 2007:
It was, however, clearly agreed between Mr Finnegan [sic] and I that I would have no personal liability in any respect in relation to the Strategic scheme for Emerald Hill.
[14] Mr Henderson also deposes that he signed the loan documents, which included a separate deed of guarantee, without reading them.
[15] As regards the deed of acknowledgement of debt, he says it had been agreed that if he signed the deed, Strategic would withdraw its summary judgment application. He signed on that basis.
[16] For its part, Strategic denies any such agreement and denies Mr Finnigan ever made any representation. Strategic has filed affidavits from its general manager, as well as from Mr Finnigan.
[17] Finally, in this recital of the background facts, I should record that at the beginning of this morning’s hearing a preliminary issue arose regarding the admissibility of certain evidence. Mr Henderson sought to rely upon a without prejudice conversation between himself and Strategic’s general manager during a phone conversation on 14 December 2009. Evidence of this conversation was ruled
inadmissible by the Associate Judge in his decision granting Mr Henderson leave to oppose the summary judgment application (11 June 2010).
[18] Strategic objected to this evidence being read and contended the Associate
Judge’s ruling on admissibility was binding, creating an issue estoppel.
[19] In seeking to re-litigate the matter afresh, counsel Mr Clay submitted an issue estoppel did not arise because:
i)the Associate Judge’s ruling had only been for the purposes of the leave application, and further was not fundamental to that decision;
ii)while there may have been a right of review against the evidence ruling, it was unreasonable to have expected Mr Henderson to have availed himself of that right of review;
iii) it was a decision on an interlocutory matter. [20] I did not accept those submissions.
[21] It is very clear from the Associate Judge’s decision, and in particular the order he made, that the Judge was purporting to give a ruling for the purposes not only of the leave application, but also for the purposes of the summary judgment application before me.
[22] The test as to whether or not an issue estoppel in an interlocutory context is created is to be found in Joseph Lynch Land Co Ltd v Lynch [1985] 1 NZLR 37 at
43:
… the ultimate question is concerned not so much with the character of the earlier decision, ie whether it should be regarded as final or interlocutory. The question is rather whether in the circumstances it is reasonable to regard the earlier decision as a final determination of the issue which one of the parties now wishes to raise.
[23] In my view, that test is satisfied on the facts before me.
[25] I therefore ruled that the evidence is inadmissible and that the parties are bound by the Associate Judge’s decision.
The summary judgment application and the principles that apply to such applications
[26] In order to grant Strategic’s application, I must be satisfied there is no arguable or tenable defence.
[27] The relevant principles have been usefully summarised by the Court of
Appeal in Krukziener v Hanover Finance Limited [2010] NZAR 307:
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ
84 (CA).
[28] Each of the parties emphasised different aspects of this paragraph.
[29] Mr Tingey stressed the importance of my taking a robust view. For his part, Mr Forbes emphasised the existence of a factual dispute before the Court and the context in which the factual dispute has arisen, namely: Mr Henderson was not getting any personal benefit out of the transaction; there was evidence that the original loan made by Strategic to Mr Duff’s company was outside its normal lending criteria; and initially the purchase was effected by a Strategic executive, indicating that this was a Strategic-controlled scheme.
[30] It is impossible not to have a degree of sympathy for Mr Henderson. It is clear from the evidence that he was motivated by friendship and did not gain any, or any significant, personal benefit from the transaction. In those circumstances, it is hardly surprising that he feels somewhat aggrieved.
[31] However, I am satisfied that, notwithstanding the high threshold required of a summary judgment application, legally Mr Henderson does not have a tenable defence. There is not an issue worthy of trial.
[32] I have come to that conclusion for two key reasons:
i)In my view, Mr Henderson’s claims about the existence of an alleged misrepresentation or agreement are not inherently credible, being inherently implausible and contrary to contemporaneous documentation.
ii) The signing of the deed of acknowledgement of debt.
[33] The affidavits sworn by Messrs Henderson and Duff give the impression that
Mr Henderson only became involved with attempts to help Mr Duff in late-2007.
[34] In fact, the documentary evidence, including a letter from Mr Henderson’s own solicitors, shows otherwise. It shows that Mr Henderson had been involved well before that, as early as June 2007; that proposals were initiated by him or his agents; and that from the very beginning of his proposed involvement with refinancing the property it was always contemplated he would be undertaking personal liability.
[35] The significance of this is not only that it undermines the credibility of his account of the critical 7 December 2007 meeting, but it also shows that the fact he was taking no personal benefit was not seen by any of the parties as mutually inconsistent with or exclusive of a personal guarantee.
[36] Mr Henderson also deposes that it was at the meeting on 7 December with Mr Finnigan that Strategic asked him to become involved with the purchase of the property. However this is at odds with an email from his agent and accountant, Mr Angus. The email of 28 November shows that in fact it was Mr Henderson who was proposing he become involved with the purchase of the property. The email was sent some eight days before the Finnigan meeting.
[37] Further, there is another critical email from Mr Angus on 4 December, forwarding Strategic a statement of Mr Henderson’s personal position. The email states:
SP attached for Dave Henderson in confidence.
We would need sufficient to buy the property and meet 12 months interest and Strategic would remain on as second.
The Borrower would be New Zealand Primary Holdings Limited with Dave as personal guarantor.
Any queries come back to me. Thanks
Geoff
PS. Lending any money for other deals??
[38] By the time of the 7 December meeting Strategic had already issued its loan offer, which expressly refers to the provision of a personal guarantee from Mr Henderson.
[39] Following the meeting of 7 December Strategic reiterated its requirement for a personal guarantee from Mr Henderson on three further occasions:
i)On 13 December 2007 when Strategic issued a new loan offer to Mr Henderson. It contained a requirement for an all obligations unlimited guarantee.
ii)Again on 13 December 2007, when Mr Henderson received copies of the loan documents, which included the personal guarantee requirement.
iii)On 14 December 2007 when Strategic’s solicitors sent amended execution copies of the loan documents to Mr Henderson’s solicitors. These included a personal guarantee from Mr Henderson.
[40] Significantly, at no stage did either Mr Henderson or his solicitors (to whom, as I have said, the documents were sent) raise any objection to the continuing requirement for a personal guarantee. Indeed, the first time the existence of any alleged promise or agreement to the contrary was unequivocally raised by Mr Henderson was in December 2009. This despite the fact that prior to that he had been engaged in direct communications with Mr Finnigan himself and at a time when he (Mr Henderson) was aware enforcement steps were being taken. Nowhere is there any expression of surprise that he has just discovered the existence of a personal guarantee among the papers he signed. Nowhere does he specifically say that Mr Finnigan expressly agreed there would be no personal liability.
[41] What Mr Henderson does say is that everyone knew there was no personal benefit to him, but that is a very different thing from contending there was an express promise to the effect no personal guarantee was required.
[42] Importantly, there was no commercial or legal purpose for requiring a guarantee from Mr Henderson, other than to ensure he had personal liability to Strategic.
[43] Mr Henderson claims he never read the loan documentation. However there is an email from him expressly acknowledging receipt of the loan documents and expressly stating that he would be “looking at them” in a few minutes.
[44] I also accept the submission it is implausible he would not have recognised the guarantee as being a personal guarantee, given that it was in the form of a separate deed, titled in bold type on the front cover “Deed of Guarantee and Indemnity” and naming himself as guarantor.
[45] Finally there is Mr Henderson’s signing of the deed of acknowledgement of debt. Mr Henderson has sought to explain that away by saying he only signed it on the basis of an agreement that Strategic would withdraw its summary judgment application. However, that assertion is contrary to the unambiguous wording of the acknowledgement itself. Secondly, it simply does not make sense. Thirdly, it is contrary to the conduct of both parties. If what Mr Henderson was saying were true, why was the summary judgment application adjourned at least three times by consent? Had the assertion he is now making been correct, once he signed the deed he would have been insisting on the summary judgment application being withdrawn, rather than adjourned. As I have said, his assertion is inherently implausible, because it is nonsensical. Even if the application for summary judgment had been withdrawn, the deed would still have enabled Strategic to immediately obtain judgment by default.
[46] It was an adjournment which Mr Henderson sought and which he acquired the adjournments being agreed by Strategic, from 21 September to 14 December
2009.
[47] Legally, the effect of the deed was to create an estoppel by deed. An alternative analysis is that it creates an estoppel by representation or that it has contractual effects, Strategic furnishing consideration by consenting to an adjournment.
[48] The deed of acknowledgement of debt is in itself a complete answer to all the defences that have been raised. It prevents Mr Henderson from relying on any alleged representations or promises and it prevents him from raising pleading/sufficiency of evidence arguments regarding the mortgagee sale obligations.
[49] Because of the view I have taken, it is unnecessary for me to consider the further legal arguments raised regarding the various defences. Suffice it to say that I consider Mr Henderson also faces other very formidable obstacles including for example the relevant legal principles relating to the admissibility of pre-contractual representations which contradict the very essence of the written contract
subsequently entered into. It is not, however, necessary for me to reach any concluded findings on those points. I have come to a clear and certain view that there can be no arguable defence in any event because of the acknowledgement of debt and because the claims relating to an alleged agreement in December 2007 lack inherent credibility.
[50] The summary judgment application is accordingly granted. Judgment is entered for the sum of $2,370,126.95.
[51] As regards costs, those are reserved. Counsel are to engage in discussion regarding costs, with a view to resolving same. Failing agreement, Mr Tingey is to file submissions within 10 working days, with any reply submissions within five working days thereafter.
[52] At the request of Mr Tingey I confirm that the order granting judgment may be sealed, notwithstanding that costs are an outstanding issue.
Solicitors:
Bell Gully, Auckland
Cousins & Associates, Christchurch
(Counsel: A J Forbes QC, Christchurch)
SCHEDULE A
This Deed of AcknowledgelTient of Debt Is me ai between (I) David 1w Haidenom (Otsar.dor) and (2) Stratagla Fhnce Un*.d (lander)
Introduction
A The Lender advanced the nn at NZflO34.237.30 (the Prinoipel) to Oesver Pab..
Limited (Cleaver) by way at a Ical aen&iI entered into as between the Lsr awl Cleaver on 14 December2007 (the Last Aureement). The Loan Aweanalt piovided Ia’ payment of a comnghnentfee of .36C.0O plus Interest of 23% If rqqnemt we. not in
by the repayment data
The Loan Agreement wasseared by a D of Gu2rantee and Jndenuibj (die G.a.sits.) entered Into between the Lender the Guerantor on 14 December2007 Lilder wt,Ith It Guarantor agreed to pay cii kidebtedies. at Cleaver to the Lander on denaid by his Lender.
C.Under the tenils of the Loan Aisvient, Qe.ver was required to mpy dear edbwiced by the Lender together v.ili l.&resby 14 D&ember 2008. Geeverfied to me repayment as agreed undee St Lcai AgenenL
U. The Lender made demand yi Ui. Gnam under the Suaraitceon 15 Deiiber200e.
The Gsantor has f3led to iiide iepe),nant to the Lender as røqulred by the Guarasa
K Is agreed
Operative provslons
The Guarantor hereby irrevoctly adnRs diet
1. The Guarantor Is liable to The Leider under the Guarantee forthe Pflndpi j4us Intend &
23% peranrlurn .aperthetanisdlheGis.iIee.
2.The judgment aim of $Z6O,147.79 as dETled In the Statement of Cn Sed In pmoee.tig CIV 2009-409-1731 (the Judgmee* Stan) nwstely reflects the amount mwd by Iii. Guarantor to the Lender on U Jim. 2009. The Guarantor has no detema the dim nd
out In the Stament of Claim ifed In the piegtig CIV 2009409-1731 (Vie P,oanang)
and he undertakes not to file sty d&sice Wills claim In the Proceedlrç.
3,Interest of 23% per annun aiflnt swus dab on the pdndpe its The t indebtedness of Cleaver to the Lander Is repaid.
4.The Guarantor Is lIable under the Gwdee for all casts incurred by the Lswler In connection th the enfnroeine,t cith. L.endts rights under the Guarcntco ale ñi indemnity basis and these cods KidwIe the Lnders costs in the Ptcceeaig.
5.The Guarantor has no counte,dti, .et-df oross-damand of any nshnInseipectdth. debt due to (he CredItor, end widMcn diM he will not seek to ri any ccwiWdan, set oft or cross-demand agaln&tie Lander. r me Proceedng or otheiwlsa
DOC aEF 1S21OO9_I
Dodd C ACkraydgmar,ICrDebI
Execution
Executed as a deed of acknowledgement of debt.
SIGNED by David Ian Henderson
In the presence of:
ss gnature
-
Pri Nar
C
Wibicss OccupatIon
C
Fl reildence
DOC HE 1671Oit_1
D.flCF AckI,OOdg.m.colObI 2
0
0
0