Trustees Executors Limited v Smith HC Auckland CIV-2011-404-1377

[2011] NZHC 1347

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-1377

BETWEEN  TRUSTEES EXECUTORS LIMITED Plaintiff

ANDGERALD MURRAY SMITH Defendant

Hearing:         1 August 2011

Appearances: G T Toebes for the plaintiff

H T Sorenson and the defendant in person

Judgment:      1 August 2011

ORAL JUDGMENT OF PETERS J

Solicitors/Counsel:

JT Law, Solicitors, Wellington (email:  [email protected])

Sorenson Law, Solicitors, Auckland (email:  [email protected])

TRUSTEES EXECUTORS LIMITED V SMITH HC AK CIV-2011-404-1377 1 August 2011

[1]      This is an application by the plaintiff for summary judgment against the defendant.

[2]      The claim arises in respect of two advances which the plaintiff made to the trustees of the Netherwood Trust (“trustees”).  The trustees are the defendant and a trustee company.  The defendant guaranteed the trustees’ repayment of the plaintiff’s advances.

[3]     Pursuant to the terms of loan agreements dated 20 April 2007 (“loan agreements”) between the plaintiff, the trustees and the defendant as guarantor, the plaintiff agreed to advance to the trustees $1,000,000.00 and $575,000.00 respectively.

[4]      The plaintiff took security for the advances by way of mortgage secured against three properties situated in Remuera, Auckland.  The trustees have defaulted on their obligations under the loan agreements and the plaintiff has made demand for payment of all sums due.

Liability

[5]      The  defendant  does  not  dispute  his  liability  to  the  plaintiff  under  the guarantees contained in the loan agreements.  In paragraph four of an affidavit sworn on 15 April 2011, the defendant acknowledges that, as guarantor of the trustees’ obligations, he is liable under the loan agreements for any default by the trustees in paying sums due.

[6]      Accordingly, the sole issue which arises is as to quantum.

Quantum

[7]      The  plaintiff ’s  statement  in  respect  of  each  advance  is  annexed  marked

“A” to an  affidavit in reply which Mr Robert  Russell of the plaintiff swore on

4 May 2011 (“statements”).

[8]      Taking the first advance, it is apparent from the entries in the statement that the plaintiff advanced $1,000,000.00 to the trustees on 1 May 2007.  The plaintiff retained $120,000.00 of that sum to cover interest which would fall due on the advances in the first 12 month period.

[9]      At page four of the same exhibit “A” is the statement in respect of the second

advance.  That page records the plaintiff ’s advance of $575,000.00 to the trustees on

1 May 2007.

[10]     In submissions dated 23 June 2011, counsel for the plaintiff set out the sum which the plaintiff contends is owing from the trustees and the defendant pursuant to the terms of the loan agreements as at 1 August 2011.  The defendant has taken issue with several matters relating to the sum claimed to be due.

[11]     First, the defendant questioned whether, in effect, the trustees had paid twice the interest due on the advances in the first year. As I have said, the plaintiff retained

$120,000.00 for this purpose.  The matter requiring investigation was whether the trustees themselves paid interest during this period, so as to mean that the interest which was due had, in fact, been paid twice.  There is, however, no evidence of the trustees  paying  any  interest  during  that  first  period  and  the  statements  do  not evidence any such payments.  The defendant accepts that there is no evidence of any such payment.

[12]     Secondly, the defendant questioned whether all rent from the rear property on the site, which is let to a third party, had been applied against the loan balance. Again, it appears from statements that all sums which should have been credited to the loan accounts in that respect have been so credited.   The defendant no longer pursues this point.

[13]     The third issue which arose and which some time has been spent on today, concerns the application of funds deriving from the sale of a property in Remuera in or about September 2009.  The defendant enquired as to whether the plaintiff had applied all, or only part, of the sum in reduction of the trustees’ indebtedness.

[14]     From a document which counsel for the plaintiff made available to me and to counsel for the defendant today, it appears that the trustees paid $528,387.27 to the plaintiff.

[15]     The statement in respect of the first advance records a credit of $494,997.11 on 7 September 2009 followed by a further drawdown of $439,081.02.  The credit and drawdown had the effect of making a net reduction of $55,916.09 in the sum due under that account.

[16]     The credit entries for 7 September 2009 in respect of the second loan are

$33,390.16 and $439,081.02, being the sum drawn down on the first loan advance (see above).  These sums, together with the $55,916.09 applied to reduce the first advance, total $528,387.27.

[17]     Mr Sorenson appeared for the defendant today.  He is not familiar with this matter but appeared to assist the defendant.  Having heard submissions from counsel for the plaintiff on quantum, I took Mr Sorenson and the defendant through the statement.   Mr Sorenson advised that he understood the accounting and that the defendant raised no further objection on the matter of quantum.

[18]     The defendant asked to address me personally.  The defendant told me that he simply wishes to have some time to make the best possible arrangements he can for the sale of either or both of the remaining properties.  The defendant considers that the best outcome for all concerned will be achieved if he is given time to arrange a sale of the properties in an orderly way.

[19]     It will be some time before the plaintiff can enforce judgment against the defendant.    In  the intervening period,  it  is  of course open  to  the defendant,  in consultation with the plaintiff, to make such progress as he can to realise the best sale of the properties that can be achieved at present.

[20]     I enter summary judgment for the plaintiff both as to liability and quantum.

[21]     Mr LaHatte, who has previously appeared as counsel for the plaintiff, was not present  today.    As  I  understand  it,  there  is  an  issue  as  to  legal  aid,  hence Mr LaHatte’s absence. Accordingly, there will be no order as to costs.

..................................................................

PETERS J