Waimauri Limited v Gordon

[2021] NZHC 2965

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2021-442-007

[2021] NZHC 2965

BETWEEN

WAIMAURI LIMITED

Plaintiff

AND

SUSAN GORDON as administrator of the estate of Colin Norman Gordon Defendant

Hearing:

6 October 2021

Appearances:

M Lenihan for Plaintiff

J Ironside and G Engelbrecht for Defendant

Judgment:

3 November 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1]    At the centre of this dispute is a 1949 Aston Martin DB1. To anyone who knows anything about motor cars, that in itself is enough to pique interest. It is an extremely rare and very valuable vehicle. Only 15 were ever made.

[2]    The plaintiff, Waimauri Ltd, sues the defendant, Mrs Susan Gordon in her capacity as the administrator of the estate of her late husband, Mr Colin Gordon, pursuant  to  a  term  loan  agreement  that  involved  Waimauri  as  lender  and  a  Mr Dale Conlon and Mr Gordon as borrowers. The agreement was executed as long ago as 9 February 2009. Waimauri contends that the borrowers have been in default since 9 May 2009 when the principal and interest (in the agreement designated “premium”) was payable. The original principal amount of the loan was $70,000. With the premium, and interest from 9 May 2009 at contractual rates, the amount sought is now close to $600,000.

WAIMAURI LIMITED v GORDON [2021] NZHC 2965 [3 November 2021]

[3]    Waimauri has applied for summary judgment. In my judgment, its application cannot succeed. The balance of this judgment is directed at explaining why.

Summary judgment applications

[4]    Summary judgment is provided for in pt 12 of the High Court Rules 2016. Rule 12.2(1) concerns applications by plaintiffs. It provides:

(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[5]    The leading case is Kruikziener v Hanover Finance where the Court of Appeal said:1

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 not consistent 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).

Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.

[6]    In the end, then, the plaintiff applicant must be able to satisfy the Court so that it is left with no real doubt or uncertainty that the defendant respondent has no arguable defence.

1      Kruikziener v Hanover Finance [2008] NZCA 187 at [26]–[27]

The factual background

[7]    The description of the factual background that follows is based for the most part on the affidavit evidence offered in support of Waimauri’s application.

[8]    The Aston was acquired in 1991 for £100,000. A considerable proportion of the affidavit evidence offered in support of and in opposition to Waimauri’s application was directed at the question of whether it was acquired by Mr Gordon or a company by the name of Felbridge Auto  Restorations  Limited  in  which  Mr  Conlon  and Mr Gordon were the shareholders and directors, and which traded as a motor vehicle restorer. I do not understand why. Whether the vehicle was acquired by Mr Gordon or by the company appears to me to be irrelevant to any issue in the case.

[9]    To cut a very long and remarkable story short, the Aston was sold to a Japanese buyer in 1994. However, having been shipped to Japan, it was stolen whilst it was sitting on the wharf. The suspicion harboured by all parties is that the underlying sale and purchase arrangement was not legitimate, that the buyer was a member of the Japanese underworld and that the theft of the vehicle following its arrival in Japan was a pre-meditated exercise.

[10]   Strenuous efforts were made to trace the Aston in the following years. These included Mr Gordon travelling to Japan in 2002 and confronting the alleged thief (and his associates) at a warehouse where the car was stored. The net result of this exercise was apparently that Mr Gordon was badly beaten. In 2007 the alleged thief was killed, and in 2008, the Japanese authorities finally recovered the Aston. Arrangements were then made to repatriate it to New Zealand. However, understandably, by this stage, considerable costs had been incurred to the Japanese authorities and others and these needed to be paid before arrangements could be made to ship the vehicle back here. Obviously, there were also shipping costs involved.

[11]   It was at this point that Waimauri became involved. Effectively, the company was approached to finance the repatriation of the Aston and that was the purpose of the 9 February 2009 loan.

[12]   The essential terms of the loan are summarised — accurately so far as I can see — by Mr Edney in his principal affidavit as follows:

19.The main details of the loan agreement were:

(a)The loan amount was $70,000.

(b)Repayment of the loan amount, together with a premium of

$23,000, was due on 9 May 2009.

(c)The lender was Waimauri.

(d)The borrowers were Mr Gordon and Mr Conlon.

(e)Mr Gordon executed the GSA in Waimauri’s favour.

[13]   As Mr Edney says, the loan agreement was supported by security in the form of a general security agreement.

[14]This was a very short-term loan at a very high interest rate.

[15]The repayment date of 9 May 2009 came and went.

[16]   It is not altogether clear what engagement there was between Mr Edney on the one hand and Mr Conlon and Mr Gordon on the other hand between 9 May 2009 and the date on which demand was ultimately made for repayment. The evidence as to the extent of exchanges between the parties is minimal. However, it is clear enough that Mr Edney took steps to keep himself appraised of what was going on and Mr Gordon took steps to sell the Aston so as to put himself in a position to repay the loan.

[17]   Demand was first made by Waimauri on Mr Gordon by letter dated 5 October 2018, nine years after the debt is said to have fallen due. Demand was for the amount of $378,540.51. It was not paid.

[18]   Eventually, Mr Gordon appears to have secured a sale of the Aston to an Australian buyer, although there are no details as to this, or what happened to the proceeds.

[19]Mr Gordon died in July 2019.

[20]   Waimauri did not seek to rely on its general security agreement. It is unnecessary to consider why. A security holder is under no obligation to do so.

[21]   In any event, on 14 May 2020 Waimauri again made demand under the agreement on Mrs Gordon as the administrator of the estate of Mr Gordon, and then commenced this proceeding early this year.

[22]   By the time Waimauri’s summary judgment application came to be argued, the issues were well focussed and I am grateful to counsel for the care and attention that they obviously gave to the refinement of these.

[23]   Waimauri’s case can be summarised briefly. It says that it entered into the loan agreement with Messrs Conlon and Gordon on 9 February 2009, that the principal and premium provided for in the agreement was to be paid on 9 May 2009; that it was not paid and that it is entitled to a judgment for that amount together with interest since  9 May 2009 which in total it calculates — no doubt correctly — at $592,498.20

[24]   The defences that are put up by Mrs Gordon in her capacity as the administrator come down to three:

(a)First, it is said that Waimauri’s claim is time-barred. Because the agreement was entered into on 9 February 2009, the Limitation Act 1950 (as opposed to its successor, the Limitation Act 2010) applies. The 1950 Act provides that any claim on a simple contract must be commenced within six years. However, the Act also provides that a claim pursuant to a deed may be commenced within 12 years. The defence put up here is that the 9 February 2009 agreement is a simple contract, as opposed to a deed, and therefore that the claim is time-barred;

(b)Second, it is contended that Waimauri has not established a fundamental aspect of its claim, namely that it paid the principal amount of the loan to the borrowers or to their order. Clearly, if it did

not, then it did not discharge its part of the agreement, and has no claim against Mr Gordon’s estate;

(c)Third and finally, it is contended that Waimauri’s delays in terms of taking steps to enforce the agreement amount to oppression and that the Court should exercise its right to refuse recovery on that basis.

Is the loan arrangement of 9 February 2009 a deed?

[25]   The question of whether the law will treat a document as a deed raises two issues:

(a)First, whether the requirements of a deed as set out in s 9 of the Property Law Act 2007 have been complied with; and

(b)Second whether the parties’ objectively determined joint intention was that the document should be treated as a deed.

[26]   It is common ground that the requirements of s 9 of the Property Law Act are met in this case.

[27]Accordingly, the only issue is the parties’ objectively assessed joint intention.

[28]The leading case is Morley v Spencer where Richardson J said:2

In ascertaining the intent of the parties in determining the true character of a transaction in other respects the instrument must be considered as a whole in its factual matrix and having regard to the object. Extrinsic evidence concerning the words or acts of the parties as well as examination of the words contained in the document itself may assist in discerning the intent of the parties …

[29]   Whether the document is intended to have present effect as a deed can only be determined by careful consideration of its content and language and the objectives of the parties as reflected in the instrument considered in its factual setting.

2      Morley v Spencer [1994] 1 NZLR 27 (CA).

[30]   Mr Lenihan drew my attention to the comparatively recent judgment of this Court in Barry v Carlisle3 where Brown J concluded that an agreement prepared by the parties without the assistance of solicitors was to be treated as a deed having regard to their joint intention. There, the document was headed “AGREEMENT ON PROPERTY AT WAIRAURI VALLEY”. It described the property in respect of which the parties were contracted and continued:

This letter is to confirm Lynda’s legal right as a half owner in [description of the property]. In the event that Lynda requests a legal transfer of a half share in the Certificate of Title to herself, THEN Francis shall sign all necessary documents and make the Certificate of Title to enable registration of the transfer.

[31]   The attestation clauses in that document provided for the parties’ execution of the document to be witnessed. Brown J’s conclusion as to the status of the document was in these terms:4

While clearly not the product of a solicitor, I consider that the document is crafted in such a manner as a lay person might compose if endeavouring to create a document similar to one professionally prepared. In my view the structure and the tone of the document, the manner of the description of the property, the subject matter and mode of execution collectively point to a document which was not only intended to have legal effect but was also viewed as a formal and solemn arrangement.

Viewed objectively, I consider that the Agreement dated 17 October 2002 was intended to be a deed notwithstanding that neither party was then familiar with the concept of a deed.

[32]   In this case, the parties were assisted by solicitors and they elected to use the Auckland District Law Society standard loan agreement. Furthermore, as Mr Lenihan submitted, that document should not be viewed in isolation. It went hand in hand with the security agreement executed for Waimauri’s benefit. That was unquestionably a deed. These were serious commercial instruments and, in my view, appear to have been intended by the parties to articulate the serious commitments they were making to each other.

[33]Moreover, as Mr Edney said in his principal affidavit:

3      Barry v Carlisle [2015] NZHC 1554, (2015) 16 NZCPR 449.

4      At [103]–[104].

17.I had the template of the loan agreement altered before I sent that and the other documents to Mr Gordon and Mr Conlon for execution. I was wary of Mr Gordon, particularly after he asked to have the security interest over the Aston Martin removed. I had the provision for signature in the loan agreement amended so that it provided for the signatures of Mr Gordon and Mr Conlon to be witnessed. It did this to try to stop Mr Gordon from later denying that he signed the loan agreement or otherwise disputing the validity of it. I am an experienced property investor and am aware of what a deed is. I wanted the loan agreement executed as a deed by being witnessed to bolster the position of Waimauri if Mr Gordon later disputed the agreement. At page 58 of the bundle is the front two pages of a blank template of the loan agreement. When compared to the loan agreement as executed it shows the provision I had added to the loan agreement for the witnessing of it.

[34]   Whilst that evidence may be criticised as being direct evidence of Mr Edney’s subjective intention, there is no doubt that the addition of the requirement that the borrowers’ signatures be witnessed added a further layer of formality to the arrangement.

[35]   One further aspect of the background is relevant. The borrowers, Mr Conlon and Mr Gordon, executed the document in front of their bank manager and somebody

— either the bank manager or the borrowers themselves — noted details of the borrowers’ New Zealand passport numbers on the agreement.

[36]   I am quite satisfied that this is a situation in which the law should treat the agreement between the parties as a deed. All the requirements of the Property Law Act are met.5 The document records important commercial relationships between the parties. Plainly they treated the loan arrangement as a serious matter and intended formally to record the commitments they were making to each other. I see this case as being materially further along a continuum towards a deed than the document that Brown J was dealing with in Barry v Carlisle. I am satisfied that Waimauri has established that that there is no arguable time bar defence in this case because it can bring itself within the 12-year limitation period for a claim on a deed.

5      Although I acknowledge McKay J’s observation in Morley v Spencer, above n 2, at 37, that many contracts are executed in a manner that would comply with the Property Law Act’s formalities, even though they are not intended to operate as deeds, it is nonetheless a factor, which, in combination with other indicators, can lead to a finding that an agreement is in fact a deed.

Can Waimauri establish that it paid the principal monies to the borrowers or their order?

[37]   There is a complete lack of the documentary evidence one usually expects to see when an issue arises concerning whether monies were paid.

[38]   In an ideal case the affidavit evidence would include the contractual documentation providing for a payment, the vouchers created by a payor, payee or both in relation to the payment of the money, and the bank records of payor or payee or both demonstrating the flow of funds from one account to another. Here, as I say, there is none of that.

[39]   For Waimauri Mr Lenihan points to the fact that the loan was entered into some 12 years ago, and that none of the records are said to exist. No doubt there is something in that.

[40]   However, as Mr Ironside contends on behalf of Mrs Gordon, it is hard to think that no document of the sort I have described exists.

[41]   In the end, Mr Lenihan effectively asks the Court to infer that the money changed hands because Mr Gordon received the car back and would not have been able to achieve that but for receipt of the funds from Waimauri.

[42]   It is quite possible to imagine that the Court may reach that conclusion at trial, but, in my view, it is asking too much to invite the Court to infer that on the basis of untested affidavit evidence on a summary judgment application. In short, I am not satisfied that Waimauri can establish that this defence is not reasonably arguable.

Does the delay in this case amount to oppression?

[43]   Mr Ironside’s submissions in relation to this aspect of the case could never be described as over-complicated.

[44]   As he pointed out, the essential facts are that the loan agreement was entered into in February 2009. It was intended to be a short-term loan of three months, with principal and interest to be repaid by May 2009. There is no evidence of a formal

demand having been made for repayment until October 2018 —  nine  years later.  Mr Ironside says that that delay is “largely unexplained”. That may be overstating the position. It seems clear enough that there was at least occasional contact between the parties and that Waimauri was aware of Mr Gordon’s efforts to sell the Aston. As he submits, however, the net effect is that a claim which, as at May 2009, stood at

$70,000, ballooned into a claim of over $480,000 (as at May 2020).

[45]   Mr Ironside’s essential submission is that these factors make the arrangements between parties “unjustly burdensome” and unconscionable. He continues:

At the very least, the defendant should be able to enquire further of the plaintiff as to the reasons for the delay. The lack of any record of demand, prompt enforcement action, or notification to the borrowers of escalating interest charges, are matters that the defendant is entitled to pursue. It will be for the Court to assess all of the circumstances to determine whether in claiming the higher interest rate for the full period from 9 May 2009, the plaintiff as lender is seeking to enforce the agreement in an oppressive manner, and that a significant and shorter period is both just and fair.

[46]I agree.

[47]   Although I acknowledge Waimauri’s submission that Mr Gordon was obstructive throughout the process, or essentially ignored the loan, that strikes me as a dispute incapable of being properly resolved on affidavit evidence or at a summary stage. But more fundamentally, the fact a formal demand was not made until 9 years after payment was due seems to at least raise the possibility that the defence that the enforcement of the loan was carried out in an oppressive manner for the purposes of s 120 of the Credit Contracts and Consumer Finance Act 2003 cannot be ruled out. That is so despite the clause in the loan agreement which states delay does not affect the lender’s rights.

[48]   Outside of limitation periods, there is of course no strict requirement for when a party must enforce a (common law) claim. And there is equally no fixed period of delay that will amount to oppression. Oppression is generally considered to mean a

breach of reasonable standards of commercial practice,6 and in deciding whether to reopen a contract, the court must have regard to a large number of matters.7

[49]   While mere unfairness or difficulty performing a contract will not generally amount to oppression,8 as I have said, the delay in this case at least raises the possibility of oppression. And before a Court would be willing to rule on whether the delay in a certain case is oppressive, evidence as to standard commercial practice with these types of loans would be required.

Conclusion

[50]   In my view, the plaintiff has not established that the defendant has no arguable defence to this claim. It seems to me that she is entitled to put the plaintiff to proof both as to whether it can persuade the Court that it paid the amount it says it paid to Mr Gordon or his order, and also as to whether or not it is entitled to recover the full amount of its claim or whether its actions amount to oppression. For those reasons, I decline to make a summary judgment order.

[51]   In accordance with the Court’s usual practice my preliminary view is that no costs order should be made at this stage. However, given that I haven’t heard from counsel as to costs I formally reserve them. If counsel have a difference of view as to the way costs should be dealt with and cannot settle the issue, they may come back to the Court by memoranda in the usual way.

Associate Judge Johnston

Solicitors:

Glasgow Harley, Nelson for Plaintiff Brown Partners, Auckland for Defendant

6      See GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [46].

7      Credit Contracts and Consumer Finance Act, s 124.

8      See for example Taylor v Westpac Banking Corp Ltd (1996) 7 TCLR 177, 104 (CA) at 184; Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC) at 16.