Thomas v Harnish - [2021] NZHC 1007

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2021-488-10

[2021] NZHC 1007

BETWEEN
DAVID MICHAEL THOMAS and JEANETTE DIANNA THOMAS

Plaintiffs

AND

OWEN CECIL ERIC HARNISH

Defendant

Hearing: 12 April 2021 at 2:15pm

Appearances:

Nura Taefi for the Plaintiffs Jeremy Browne for the Defendant

Judgment:

7 May 2021

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 7 May 2021 at 11:00am

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
Duncan King Law Limited (Campbell McGill), Epsom, Auckland, for the Plaintiffs Henderson Reeves (Jeremy Browne), Whangarei, for the Defendant

Copy for:
Nura Taefi, Barrister, Shortland Chambers, Auckland

THOMAS and THOMAS v HARNISH [2021] NZHC 1007 [7 May 2021]

[1] Mr and Mrs Thomas sue Mr Harnish for $291,621.82 under his guarantee of their loan to his company, Harnish Marine Ltd. Mr and Mrs Thomas took security over the assets of Harnish Marine Ltd under a general security agreement. The only significant asset was a vessel. The Thomases appointed receivers who sold it but that was not enough to clear the company’s indebtedness. The Thomases have applied for summary judgment.

[2] In opposition, Mr Harnish denies that his company defaulted under the loan agreement or, if it did, any default was not its fault. He says that the receivership was invalid and that the receivers breached their duties under ss 18 and 19 of the Receiverships Act 1993. The plaintiffs are arguably liable for the receivers’ breach of duty. He also says that this case should not be seen as a standard commercial claim against a guarantor. There is a family relationship. The plaintiffs are his daughter and son-in-law.

[3] There is no dispute that Mr Harnish guaranteed his company’s obligations under the term loan and the general security agreement. He does not raise any defences specific to the law of guarantees. The main questions are:

(a)Did Harnish Marine Ltd default under the loan agreement?

(b)Were the Thomases entitled to call up the principal?

(c)Were the receivers validly appointed?

(d)Are the Thomases responsible for the actions of the receivers?

(e)Did the receivers comply with their duties under ss 18 and 19 of the Receiverships Act 1993?

(f)What is the amount of the Thomases’ claim?

[4] I find for the Thomases on liability. Harnish Marine Ltd defaulted in a payment under the loan. The Thomases validly called up the principal and were entitled to appoint the receivers because of the company’s default. The receivers were agents of the company, not of the Thomases, who are not responsible for their actions. Accordingly, it is not necessary to consider whether the receivers breached their duties to Mr Harnish under s 19 of the Receiverships Act. The Thomases’ evidence as to their losses is insufficient, but I give them the opportunity to file further evidence.

[5] There is no dispute as to the principles applied on plaintiffs’ applications for summary judgment.1

Facts

[6] In 2010,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] NZHC 1007
Decision Date: 7 May 2021

CaseChat Overview and Summary

The plaintiffs, David Michael Thomas and Jeanette Dianna Thomas, sued the defendant, Owen Cecil Eric Harnish, for $291,621.82 under his guarantee of their loan to his company, Harnish Marine Ltd. The Thomases took security over the assets of Harnish Marine Ltd under a general security agreement, the only significant asset being a vessel. The Thomases appointed receivers who sold it, but that was not enough to clear the company’s indebtedness. The Thomases have applied for summary judgment. In opposition, Mr Harnish denies that his company defaulted under the loan agreement or, if it did, any default was not his fault. He says that the receivership was invalid and that the receivers breached their duties under ss 18 and 19 of the Receiverships Act 1993. The plaintiffs are arguably liable for the receivers’ breach of duty. He also says that this case should not be seen as a standard commercial claim against a guarantor. There is a family relationship. The plaintiffs are his daughter and son-in-law.

The main legal issues the court was required to decide were whether Harnish Marine Ltd defaulted under the loan agreement, whether the Thomases were entitled to call up the principal, whether the receivers were validly appointed, whether the Thomases were responsible for the actions of the receivers, whether the receivers complied with their duties under ss 18 and 19 of the Receiverships Act 1993, and what is the amount of the Thomases’ claim.

The court found for the Thomases on liability. Harnish Marine Ltd defaulted in a payment under the loan. The Thomases validly called up the principal and were entitled to appoint the receivers because of the company’s default. The receivers were agents of the company, not of the Thomases, who are not responsible for their actions. Accordingly, it is not necessary to consider whether the receivers breached their duties to Mr Harnish under s 19 of the Receiverships Act. The Thomases’ evidence as to their losses is insufficient, but I give them the opportunity to file further evidence.

The court adjourned the summary judgment application to the summary judgment list on Monday, 24 May 2021. By 17 May 2021, the plaintiffs are to file and serve an affidavit proving their costs incurred, including exhibiting all invoices for their costs.

Orders