UDC Finance Ltd v Down - [2009] NZCA 192

IN THE COURT OF APPEAL OF NEW ZEALAND
CA587/2008
[2009] NZCA 192
BETWEENUDC FINANCE LTD

Appellant

ANDCAROL MARGARET DOWN

Respondent

Hearing:19 May 2009

Court:Baragwanath, Hugh Williams and Winkelmann JJ
Counsel:L C Gellert for Appellant

No appearance for Respondent

Judgment:19 May 2009
Reasons:7 July 2009

JUDGMENT OF THE COURT

A THE APPEAL IS ALLOWED.
BJudgment is entered for the appellant:
-on the first cause of action for $45,877.35;
-on the second cause of action for $67,903.67;
-on the third cause of action for $243.056.66;
-on the fourth cause of action for $157,073.26;
-on the fifth cause of action for $509,602.73.

CThe respondent is ordered to pay the appellant’s costs in the High Court on a 2B basis plus usual disbursements and in this Court on a band A basis for a standard appeal plus usual disbursements.
DIn respect of each cause of action interest from the date of today’s judgment to the date of payment is to accrue at the contractual rate set out in the relevant security document relating to that cause of action.

____________________________________________________________________
REASONS OF THE COURT
(Given by Winkelmann J)
[1]       UDC Finance appealed against Associate Judge Hole’s refusal of its application for summary judgment against the respondent, Ms Down, for sums for which UDC claimed Ms Down was liable under various guarantees she had entered into in respect of the indebtedness of 123 Metals Ltd (In Liquidation) (123 Metals). There was no appearance for the respondent at the hearing of the appeal. The Court had received indication prior to hearing that Ms Down would not be represented. After hearing argument from counsel for the appellant, the appeal was allowed and judgment entered for UDC. We now give our reasons.
[2]       Ms Down was a director and the sole shareholder of 123 Metals. She successfully resisted UDC’s application for summary judgment for an amount of approximately $1 million on the grounds that when she gave the guarantees she was unduly influenced by her husband, Mr William Conway, and Mr Raymond Moorhead, 123 Metals’ accountant and chief executive.
[3]       UDC appealed that decision on the grounds that the Judge was wrong to conclude that Ms Down had satisfied the evidential onus upon her to establish an arguable defence that she was in fact unduly influenced in the manner she claimed. UDC argued that she offered no evidence she was unduly influenced, or that UDC had knowledge or notice of any undue influence.
Factual background
[4]       UDC agreed to lend to 123 Metals a total principal sum of $1,165,467, in five loans made between the dates July 2005 and October 2007, for the purpose of purchasing particular assets. Ms Down signed the loan documentation on behalf of 123 Metals, in her capacity as director of that company. All loans were secured by a security agreement granted by 123 Metals in favour of UDC, and by further security obtained over the particular assets purchased with the advances. Ms Down signed each of…

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: [2009] NZCA 192
Decision Date: 19 May 2009

CaseChat Overview and Summary

UDC Finance Ltd appealed against the Associate Judge's refusal of its application for summary judgment against Carol Margaret Down, who was the sole director and shareholder of 123 Metals Ltd (in liquidation). UDC Finance claimed that Ms Down was liable for approximately $1 million under various guarantees she had signed for the indebtedness of 123 Metals Ltd. Ms Down had opposed the application for summary judgment on the grounds of undue influence by her husband and the company's accountant and chief executive, Mr Raymond Moorhead. The appeal was heard, and the Court allowed the appeal and entered judgment in favour of UDC Finance.

The legal issues that the Court had to decide were whether the Associate Judge was correct in concluding that Ms Down had satisfied the evidential onus to establish an arguable defence of undue influence and whether the Judge had correctly applied the principles of the defence of actual undue influence. UDC Finance argued that Ms Down had not provided any evidence that she was unduly influenced or that UDC Finance had knowledge or notice of any undue influence.

The Court held that the Judge had not correctly applied the principles of the defence of actual undue influence. The Court found that Ms Down's affidavits were wholly unconvincing and that there was no evidence to suggest that UDC Finance had knowledge or was put on inquiry that she was other than a willing signatory to the guarantee documents. The Court also held that the Judge had set the evidential threshold too low in this case. The appeal was allowed, and judgment was entered for UDC Finance in the amounts of $45,877.35, $67,903.67, $243.056.66, $157,073.26, and $509,602.73, with interest accruing at the contractual rate set out in the relevant security document relating to each cause of action. Ms Down was ordered to pay UDC Finance's costs.

Orders