Waipareira Investments Ltd v Ivil
[2013] NZHC 3048
•19 November 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-1769 [2014] NZHC 3048
BETWEEN WAIPAREIRA INVESTMENTS LTD Plaintiff
ANDBRENT ALEXANDER IVIL Defendant
Hearing: 30 October 2013
Appearances: Mr T G J Allen for Plaintiff
Mr G Bogiatto for Defendant
Judgment: 19 November 2013
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
19.11.13 at 5 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
WAIPAREIRA INVESTMENTS LTD v IVIL [2013] NZHC 3048 [19 November 2013]
Background
[1] In May 2007 the plaintiff advanced to West Harbour Holdings Limited (“WHHL”) amounts which totalled $2,492,782 after principal, interest and charges were added, secured by a mortgage over townhouses situated at West Harbour Marina. Waipareira took a first mortgage security over those townhouses. The defendant is the sole director of WHHL.
[2] In May 2008 the plaintiff also entered into a joint venture agreement with WHHL for the development of an apartment complex. Pursuant to the joint venture a company called Marina Resort Limited was incorporated in which the two entities owned 50% of the shares. The joint venture proposal was intended to result in the development of apartment units and the subsequent further addition of a hotel. While the location of the joint venture development was at the same place as the properties that were subject to the mortgage security, Clearwater Cove, the latter properties were not part of the
intended joint venture development.1 The joint venture arrangement was the
subject of later notices of cancellation on both sides. The property which was to be developed pursuant to the joint venture was known as Marina Resort.
[3] Some of the 16 existing apartments that were to be acquired for the joint venture were owned by Mr Ivil who was associated with WHHL. Three of the properties were however owned by third parties who were not parties to the joint venture heads of agreement.
[4] A key part of the joint venture was that the plaintiff and WHHL agreed between themselves that the plaintiff was to make an initial contribution of approximately $2 million.
[5] The effect of the parties’ arrangements was that the plaintiff would
relinquish its security over the townhouses and receive in return a credit for approximately $2 million in the accounts of the joint venture.
1 See West Harbour Holdings Ltd v Waipareira Investments Ltd [2012] NZHC 1645 at [13].
[6] The details of the capitalisation process which the defendant puts forward as part of its defence in the present proceedings are taken from the judgment of Woodhouse J.2 In that proceeding, WHHL applied for an order that the mortgage be discharged. Various affidavits and evidence which the parties filed in those proceedings together with the judgment itself have been adduced as part of the defendant’s evidence in the current proceeding. Mr Allan described this material as “hearsay”. Because the judgment that Woodhouse J gave in the proceedings does not give rise to an estoppel as
between the parties - it being an application for summary judgment that he gave judgment on - I consider that in the absence of evidence which demonstrates error, the account of matters set out in that judgment should, as a matter of commonsense, be taken as an accurate account of the basic characteristics of the joint venture arrangement for the purposes of this judgment.
[7] Woodhouse J concluded that the conveyances necessary to give effect to the joint venture, including the transfer of properties to Marina Resort, had not occurred. Nor had a re-financing to clear the mortgages of the properties which were to be transferred into the joint venture vehicle, Marina Resort, occurred.
[8] Purportedly because of the lack of progress in settling the transfer of properties to Marina Resort, the plaintiff gave notice of termination of the joint venture agreement 24 February 2011. This was not accepted by WHHL. WHHL elected to treat the notice from the plaintiff as constituting a wrongful repudiation of the contractual arrangements and to treat the obligations under the joint venture as still being binding on the parties. WHHL has since notified the plaintiff of the requirement that the plaintiff give discharges of the mortgages which secured the original advances. The plaintiff declined to do so.
[9] The judgment which Woodhouse J gave contained the conclusion that
WHHL had not been able to establish that the plaintiff, Waipareira, had no
2 West Harbour Holdings Ltd v Waipareira Investments Ltd [2012] NZHC 1645 at [20] – [25].
arguable defence. The justification for this conclusion was that it was reasonably arguable that WHHL was not ready willing and able to settle on its obligations arising from the joint venture agreement and therefore could not require the plaintiff, Waipareira, to provide a discharge of the mortgages. The conclusions which the Judge came to are not, of course, binding on the parties in the present proceeding.
[10] The above events are not directly the subject of the summary judgment application which is now before the Court but they are mentioned because they provide the factual context in which the matters with which the Court is now concerned took place.
[11] In this proceeding, the plaintiff seeks summary judgment for
$1,311,997 together with interest at the rate of 20.7% from 18 March 2013 until the date payment is made, and costs on a solicitor/client basis. This sum is allegedly owed by WHHL under a Term Loan Agreement dated 12
November 2010 (“the apartment loan”). This was a separate agreement from
the earlier joint-venture agreement. It is alleged that the plaintiff loaned
$640,000 to WHHL which became overdue after 12 November 2011, attracting interest at a rate of 20.7%. On 18 May 2007, the defendant had guaranteed payment of WHHL’s present and future indebtedness to the plaintiff, this guarantee covering the Term Loan Agreement. WHHL was placed in liquidation on 4 March 2013. The plaintiff has demanded payment from the defendant who has refused to pay. The plaintiff seeks to enforce its guarantee against the defendant. The defendant opposes summary judgment, arguing that he has a defence to the plaintiff’s claim so that r 12.2(1) HCR is not satisfied.
[12] The defences which the defendant relies upon are set out subsequently in this judgment.
[13] Before I consider those defences I remind myself that the approach the
Court is to take when considering a summary judgment application is that
which was set out by the Court of Appeal in Krukziener v Hanover Finance
Ltd:3
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; (1986) 1
PRNZ 183 (CA), at p 3; p 185. 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; [1979] 3 WLR 373 (PC), at p 341; p 381. 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)
The grounds of defence
[14] In his memorandum of submissions, Mr Bogiatto summarised the grounds of opposition in the following way:
a)The plaintiff has failed to establish that the defendant has no defence to the plaintiff’s claim;
b)The plaintiff has impaired or prejudiced the securities with the result that the defendant is now released from his obligations as guarantor;
c) The defendant’s right to subrogation of the securities has been compromised
with the result that he is released from any guarantee given to the plaintiff;
d)As a consequence of the forgoing defences the defendant now has a claim of set-off against the plaintiff under the principles set out in: - Grant v NZMC Ltd [1989] 1 NZLR 8 1
e)In the circumstances the plaintiff is seeking to enforce a guarantee against the defendant in respect of a Credit Contract, in an oppressive manner in breach
of Part 5 of the Credit Contracts and Consumer Finance Act 2003;
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
f) In view of the plaintiff’s conduct the defendant relies on equitable fraud as a
defence to the application for summary judgment;
g) The plaintiff’s claim for reimbursement of legal costs is excessive, lacks particulars and is disputed as to quantum and liability.
Impairment of securities as an arguable defence
[15] The first ground of opposition which the defendant relied upon was that the plaintiff has impaired or prejudiced the securities resulting in the release of the guarantee.
[16] Relying on evidence which has been submitted to the Court in related proceedings,4 the defendant makes the allegation that the liquidator of WHHL determined that the plaintiff had surrendered its securities over the townhouses owned by WHHL. Counsel argues that this follows from the occurrences which I now outline. First that the plaintiff had proposed in a letter dated 14
March 2013 that there be a change of liquidators. This letter was read out to the creditors meeting held on 5 April 2013 as a proposed resolution. The second ground relied upon is that the plaintiff filed a proof of debt in the liquidation. The third particular advanced was that WHHL voted as an unsecured creditor at a meeting of the creditors 5 April 2013. I will refer to these matters in greater detail below.
[17] The argument is that the conduct of the plaintiff as mortgagee resulted in it changing status from that of a secured creditor in the liquidation, which had the ability to rely upon its security, to the status of an unsecured creditor.
[18] The position of the defendant guarantor is that where a secured creditor values his/her security and proves in the bankruptcy for the shortfall the effect is to impair the securities which ought to have been retained for the benefit of the guarantor. Similarly, the position of the guarantor is that where the creditor
relinquishes the security in its entirety, he will be discharged from his
4 CIV-2013-4043477.
guarantee because the principles of equity which dictate such a result will come into play.
[19] The position in New Zealand is governed by s 305 Companies Act 1993 which provides as follows:
305 Rights and duties of secured creditors
(1) A secured creditor may—
(a) realise property subject to a charge, if entitled to do so;
or
(b) value the property subject to the charge and claim in the liquidation as an unsecured creditor for the balance due, if any; or
(c) surrender the charge to the liquidator for the general benefit of creditors and claim in the liquidation as an unsecured creditor for the whole debt.
(2) A secured creditor may exercise the power referred to in paragraph (a) of subsection (1) whether or not the secured creditor has exercised the power referred to in paragraph (b) of that subsection.
(3) A secured creditor who realises property subject to a charge—
(a) may, unless the liquidator has accepted a valuation and claim by the secured creditor under subsection (6), claim as an unsecured creditor for any balance due after deducting the net amount realised:
(b) must account to the liquidator for any surplus remaining from the net amount realised after satisfaction of the debt, including interest payable in respect of that debt up to the time of its satisfaction, and after making any proper payments to the holder of any other charge over the property subject to the charge.
(4) If a secured creditor values the security and claims as an unsecured creditor for the balance due, if any, the valuation and any claim must be made in the prescribed form and—
(a) contain full particulars of the valuation and any claim;
and
(b) contain full particulars of the charge including the date on which it was given; and
(c) identify any documents that substantiate the claim and the charge.
(5) The liquidator may require production of any document referred to in subsection (4)(c).
(6) Where a claim is made by a secured creditor under subsection (4), the liquidator must—
(a) accept the valuation and claim; or
(b) reject the valuation and claim in whole or in part, but—
(i) where a valuation and claim is rejected in whole or in part, the creditor may make a revised valuation and claim within 10 working days of receiving notice of the rejection; and
(ii) the liquidator may, if he or she subsequently considers that a valuation and claim was wrongly rejected in whole or in part, revoke or amend that decision.
(7) Where the liquidator—
(a) accepts a valuation and claim under subsection (6)(a); or
(b) accepts a revised valuation and claim under subsection
(6)(b)(i); or
(c) accepts a valuation and claim on revoking or amending a decision to reject a claim under subsection (6)(b)(ii),—
the liquidator may, unless the secured creditor has realised the property, at any time, redeem the security on payment of the assessed value.
(8) The liquidator may at any time, by notice in writing, require a secured creditor, within 20 working days after receipt of the notice, to—
(a) elect which of the powers referred to in subsection (1) the creditor wishes to exercise; and
(b) if the creditor elects to exercise the power referred to in paragraph (b) or paragraph (c) of that subsection, exercise the power within that period.
(9) A secured creditor on whom notice has been served under subsection (8) who fails to comply with the notice, is to be taken as having surrendered the charge to the liquidator under subsection (1)(c) for the general benefit of creditors, and may claim in the liquidation as an unsecured creditor for the whole debt.
(10) A secured creditor who has surrendered a charge under subsection (1)(c) or who is taken as having surrendered a charge under subsection (9) may, with the leave of the court or the liquidator and
subject to such terms and conditions as the court or the liquidator thinks fit, at any time before the liquidator has realised the property charged,—
(a) withdraw the surrender and rely on the charge; or
(b) submit a new claim under this section. (11) Every person who—
(a) makes, or authorises the making of, a claim under subsection (4) that is false or misleading in a material particular knowing it to be false or misleading; or
(b) omits, or authorises the omission, from a claim under that subsection of any matter knowing that the omission makes the claim false or misleading in a material particular—
commits an offence, and is liable on conviction to the penalties set out in section 373(4).
[20] I agree with the following statement of the policy reasons underlying the section.5
The general policy that underpins s 305 is derived from the rule of law expressed by Jessel MR in Re Turner, ex p West Riding Banking Co (1881) 19
Ch D 105 (at p 112):
“A man is not allowed to prove against a bankrupt’s estate and to
retain a security which, if given up, would go to augment the estate
against which he proves.”
The counterpart of this rule is that which provides that if a secured creditor lodges a claim in respect of the whole of the debt the secured creditor is deemed to have surrendered its security to the liquidator for the benefit of the creditors generally. As Jessel MR stated in Moor v Anglo-Italian Bank (1879)
10 Ch D 681 (at p 690):
“having two funds to resort to, the bankrupt’s general estate, so as to get a dividend on the whole of the amount of his debt, or his security, he elects to take the bankrupt’s estate, and in that way gives up his security.”
[21] Mr Allan submitted that had the plaintiff surrendered its security, which it denied, such a step would not have had the effect which the defendant alleges. He submitted on the authority of Cracknall v Janson6 that the surrender of the security did not result in the annihilation or loss of the security. The only consequence of the surrender was that the liquidator would
stand in the place of the mortgagee. I accept that submission.
5 Brookers Insolvency Law & Practice (online looseleaf ed, Thomson Reuters) at CA305.02.
6 Cracknall v Janson (1877) 6 Ch D 735.
[22] In that circumstance, the question is whether hypothetical surrender of the security could have constituted a breach of the arrangements between the plaintiff and the guarantor which gives rise to an arguable defence being available to the latter.
[23] Before discussing the authorities concerning that point it is necessary to briefly mention circumstances which give rise to the suggested defence that was put forward by the defendant. It is argued for the defendant that there are two reasons why the Court can conclude that it is reasonably arguable in this case that the plaintiff relinquished the security for the apartment loan to WHHL. The plaintiff’s representative is said to have so conducted himself at the creditors meeting that the liquidator is now entitled to take the view that the plaintiff was electing to relinquish its security and prove in the liquidation for the entire amount of its debt. As it happens there are proceedings on foot, the trial of which is to commence 4 November 2013, in which the liquidator will be seeking declarations concerning exactly that matter. It is an issue that has been the subject of evidence in the current proceedings. I will assume for the purposes of argument that it is reasonably arguable that that was the effect of the actions of the liquidator’s representative.
[24] One authority that considers the effect of a secured creditor proving as an unsecured creditor in an insolvency was the Queen’s Bench decision of Rainbow v Juggins.7 That decision was given in the context of a bankruptcy. However the reasoning would seem to apply equally to cases where in a liquidation a secured creditor elects to surrender his/her security. In his judgment, Baggallay LJ stated:8
But, as I ventured to observe during the argument, a secured creditor is not to be deprived of the exercise of the option which is given to them by the Bankruptcy Act, or prevented from adopting that course in relation to his security which is most beneficial to himself, simply because there happens to be a surety for the payment of this debt; for I think it must be taken that where three persons enter into the relations of creditor, debtor, and security the possible bankruptcy of the debtor is an event which the surety has in his contemplation at the time of entering into the contract of suretyship, and that consequently it becomes an implied term of the contract that, in the event of the bankruptcy occurring, the creditor shall be entitled to exercise that option
7 Rainbow and Wife v Juggins (1880) 5 QBD 422.
8 At 424.
which the bankruptcy law give him in the way which is most advantageous to himself.
[25] The commentary contained in The Modern Contract of Guarantee9 expresses the view that no firm principle can be propounded that the creditor cannot be liable for impairing a security if the creditor acts under the provisions of a statute. That reticence is apparently based upon the fact that the Rainbow decision was concerned with an implied term that the court was prepared to recognise in the circumstances of that case. On the other hand, unless there were some recognition of the necessity on occasions to surrender the security and prove as an unsecured creditor, (the outcome that s 305 contemplates) an indemnified party pursuant to a guarantee would never be able to take that course because of the risk of losing their right of indemnity under the guarantee. Because that consequence would flow in every case regardless of the individual circumstances of the parties to the contract or the background to their entering into an agreement to provide a guarantee, it must be possible that the law would imply a term of general application that the guarantee will not be discharged in the circumstances under discussion. However I accept that the legal position cannot be stated with confidence.
[26] A further issue also needs to be considered. The equitable principles that give rise to the right for a surety to be discharged were considered in the case of The China and South Seas Bank v Tan10 a decision of the Privy Council on appeal from the Court of Appeal of Hong Kong. In that case, the surety complained about conduct on the part of the creditor in not taking steps more promptly to realise its security over certain securities which had progressively devalued over a period of time to the point where they had become worthless. The facts are not similar to the present case but the case does contain a succinct summary of the conditions which must be present before equity will intervene:
Equity intervenes to protect a surety. In Watts v. Shuttleworth (1860) 5
H. & N. 235 the creditor had covenanted to insure mortgaged goods and failed to insure. A surety was released. Pollock C.B. said, at pp.
247-248:
9 James O’Donovan and John Phillips The Modern Contract of Guarantee (3rd ed, Sweet & Maxwell, Great Britain) at 412.
10 The China and South Seas Bank v Tan [1990] 1 AC 536.
The substantial question in the case is, whether the omission to insure discharges the defendant, the surety. The rule upon the subject seems to be that if the person guaranteed does any act injurious to the surety, or inconsistent with his rights, or if he omits to do any act which his duty enjoins him to do, and the omission proves injurious to the surety, the latter will be discharged . . . the rights of a surety depend rather on principles of equity than upon the actual contract.
[27] For the purposes of a summary judgment application, it is incumbent upon the defendant to demonstrate that there is at least some basis upon which it is arguable that the asserted loss of security has affected him/her injuriously.
[28] There is a separate reason why the argument about surrender of the mortgage security cannot amount to an arguable defence and that is because of the provisions in clause 3 of the deed of guarantee which the parties entered into 18 May 2007, which provided that the liability of the guarantor would not be discharged by time or other concessions being granted to the borrower –
or by anything the lender may do or omit to do or by any other act, omission, dealing or thing which, but for this provision, would or might discharge the guarantor.
[29] As well the guarantee provided at clause 5 that the guarantor agreed that his obligations under the guarantee –
Shall as between himself/herself and the lender be one of principal debtor.
[30] The effect of such a clause in a guarantee was examined in the case of Orme v De Boyette.11 In his judgment in that case, McMullin J (after referring to the principle that a variation of the obligation between the principal parties to the contract will have the effect of releasing a surety), went on to state:
Because of this principle it is not unusual, indeed it is perhaps more common than not, for a party who guarantees a debt to be made a principal debtor as against the creditor although he remains a surety as against the person whose debt he guarantees. Such an arrangement is commonly entered into where the creditor wishes to avoid the technical rules relating to contracts of suretyship under which the surety may become discharged from liability in various circumstances. In such an event the transaction takes effect according to its terms and the creditor is entitled to treat the surety as a principal debtor in every respect — Chitty on Contracts (24th ed, 1977), vol 2, para 4803. Bank
11 Orme v De Boyette [1981] 1 NZLR 576 (CA) at 580.
of New Zealand v Baker [1926] NZLR 462 is an illustration of this practice.
(emphasis added).
[31] In the case of Bank of New Zealand v Barker the principal parties had agreed to the release of a security held by the creditor.12 The guarantee in that case contained a clause to the following effect:13
6. That the relation constituted by virtue of these presents shall as between me and the bank be deemed for all purposes that of a principal obligant and not that of a surety and in particular the following provisions shall apply namely (a) The bank may grant time or other indulgence to or compound with the said customer . . . without discharging or affecting this security, &c.
[32] Sim J in his judgment commented:14
If the respondent was in the position of an ordinary surety, then it is clear that the release, without his consent, of Smith's original mortgage would have discharged the respondent from liability: Pledge v Buss. As between Smith and himself, the respondent was, no doubt, a surety; but the effect, we think, of clause 6 of the mortgage from the respondent was to deprive him of all the rights which as a surety he otherwise would have had against the appellant.
[33] In Orme the contract of guarantee contained a similar provision constituting the surety a principal debtor. The appellant claimed that he had a defence to an action on the guarantee arising from the fact that the principal parties had agreed to the variation of the securities made available to the creditor. In that case the relevant part of the agreement read:15
And it is hereby agreed and declared and covenanted by the Covenantor with the Mortgagee that although as between the Covenantor and the Mortgagor the Covenantor may be a surety only yet as between the Covenantor and the Mortgagee the Covenantor shall be deemed to be a principal debtor and liable on all covenants in the mortgage and that the Covenantor shall not be released by any act matter or thing the happening of which would release one liable only as a surety."
12 Bank of New Zealand v Barker [1926] NZLR 462.
13 At 466.
14 At 487.15 Orme, above n 15, at 577.
[34] McMullin J commented further on the position in the following passage:16
Mr Stuart sought to distinguish Baker's case on the ground that the form of guarantee used there was much more extensive than in the present case and because, in the present case, the appellant's liability as guarantor was qualified by the addition of the words "and that the covenantor shall not be released by any act matter or thing the happening of which would release one liable only as a surety". Mr Stuart said that the respondent's action in entering into a memorandum of priority without the consent of the appellant was not one which would merely have released a surety; it would have released even a principal party to the contract if he had not acceded to the giving of priority. Mr Stuart argued that the additional words were a limitation or qualification on the liability of the appellant; not an explanation of that liability.
I am unable to accept that the clause should be read in that way or that Baker's case can be distinguished on the basis suggested. The additional words seem rather to have been included as an emphasis by the respondent, for whose protection the document was prepared, that the guarantee was not one in which the appellant was to be released by anything which could release a surety only, as distinct from a principal debtor. So any composition with other creditors was not to release the appellant. Therefore, far from acting as a restriction on the respondent's right to recover, the added words were intended to reinforce the appellant's liability. The point which Mr Stuart has sought to make seems to be much the same point as was rejected by the English Court of Appeal in Perry v National Provincial Bank of England [1910] 1 Ch 464.
[35] It is clear that the form of the guarantee in Orme had close similarities to the one which the defendant signed in the present case – because as in Orme, the defendant in this case is a principal debtor and as in Orme, the defendant cannot be released from the guarantee by any act which would otherwise discharge him.
[36] Given my conclusions above, the defendant does not have an arguable defence available to him that the arguable surrender of the security arising from the dealings between the plaintiff and the liquidator has resulted in his release
from the obligations contained in the guarantee.
16 At 582.
Loss of rights of subrogation
[37] The submission was made for the defendant that:
7. By virtue of the apparent release of the securities by the plaintiff, it is submitted that the loss of right of subrogation gives rise to an arguable defence and a real question to the tried.
[38] While Mr Bogiatto put this ground of opposition forward as a separate one, it does not appear to me to be a ground of defence which is independent of the questions that he raised concerning the impairment or loss of the security. It is only because the security is arguably not available that any argument of this kind could arise. However, because the defendant as a principal debtor can have no complaint about the loss or impairment of securities there cannot be any remedy available to him for the consequent loss of the right to exercise the securities by way of subrogation.
Equitable set-off
[39] The defendant asserts that he could have a counterclaim available to him based upon alleged negligence on the part of the plaintiff in the course of its dealings with the liquidator, which the defendant says led to the loss of the mortgage security through it being surrendered to the liquidator and therefore being made available for the creditors generally.
[40] Mr Bogiatto referred to a decision of this Court in National Mortgage Nominee Company v Clark.17 The situation in that case was that the creditor had a mortgage over a property belonging to the mortgagor. The property was divided into unit titles. The mortgagee creditor permitted the sale of three of those titles without a reduction in the indebtedness secured by the mortgage. Subsequently the mortgagor was unable to pay its debts and went into liquidation. There was a deficiency which the mortgagee looked to the
guarantor to meet. The guarantor, who was deemed to be a principal debtor, raised a number of defences including a claim that he had available to him an
equitable set-off arising out of negligence on the part of the mortgagor in
17 National Mortgage Nominee Company v Clark (2006) 5 NZ ConvC 194,242 (HC).
releasing the three unit titles from the security without obtaining a reduction in debt. The Judge considered that the point was arguable and declined to enter summary judgment without first giving the guarantor the opportunity to bring proceedings in negligence against the mortgagee.
[41] In coming to that decision, the Judge relied on a decision of the High Court in Clark v UDC Finance Ltd.18 However, that decision, pre-dated the Privy Council case of Downsview Nominees Ltd v First City Corp Ltd19 where the possibility of a claim in negligence against a receiver was in issue. The receiver elected to trade the company on in circumstances where it was incurring losses. Downsview Nominees Ltd acquired the debenture of the first
security holder. The behaviour of the receiver that it appointed was at the heart of the claims which the respondent, who held a priority subject to the first debenture, made against the appellant. The allegations were that Downsview/its principal (a Mr Russell) acquired the debenture for the improper purpose of preventing the respondent from enforcing the security, conducted the receivership in a reckless or negligent manner and failed to accept the offer of the respondent as subsequent security holder to discharge the obligations under the first ranking debenture and to assign it to the respondent.
[42] At first instance, the court concluded that the claims were justified and awarded damages.
[43] In the Court of Appeal it was held that the proposition that a receiver will not be liable in negligence as long as he acts honestly and in good faith no longer represented the law of New Zealand and that a person in that position owed a duty to the debenture holders to take reasonable care in dealing with the assets of the company. The Privy Council reversed that conclusion determining that a mortgagee owed an equitable duty to mortgagors and to subsequent encumbrancers to exercise the powers conferred by the security in
good faith for the purpose of obtaining repayment. Subject to the preceding,
18 Clark v UDC Finance Ltd [1985] 2 NZLR 636 (HC).
19 Downsview Nominees Ltd v First City Corporation Ltd [1993] 1 NZLR 513 (PC).
the powers might be exercised although the consequences might be disadvantageous to the borrower.
[44] The present case also brings into focus the obligations of the plaintiff as security holder but there is a material difference in that the duty of care which would be relied upon by the defendant is one that is owed to a guarantor rather than to a subsequent security holder.
[45] This area of the law has since been subject to statutory reform which has provided injured parties with a statutory right to claim where the mortgagee has not taken reasonable care to obtain the best price reasonably obtainable at the time of the sale.20 The persons to whom the obligation is owed include “covenantors” which term is defined in the act to include guarantors. In the absence of detailed argument on the point it is difficult to come to a firm
conclusion. However, if any duty which the creditor owes to the guarantor is limited to acting in good faith and for the purposes of obtaining re-payment, then the prospects of the court determining that a broader obligation is owed, arising from the duty of care not to deal negligently with the securities, would not seem to be great. I agree however that it cannot be said that such a duty of care can be conclusively ruled out. If that is the case, then such a duty of care would no doubt translate into an entitlement to damages in appropriate cases where a creditor has not conducted him/herself reasonably when dealing with the security. What of any loss would be recoverable under that head in the present litigation was not explored in the evidence or submissions made on behalf of the defendant.
[46] It is necessary to consider further matters that were raised in the course of submissions. The defendant alleges that he has cross claims arising out of what he claims was the breach of the joint venture agreement which the parties entered into. In order for this ground of claim to succeed, it is necessary for the defendant to demonstrate that he had a claim and that there is some ground for
linking the apartment loan which is the subject of the present proceedings to
20 Property Law Act 2007, s 176.
the JV obligation in order to satisfy the requirements of an equitable cross- claim.
[47] Mr Allan for the defendant submitted that the provision of the funding by way of the apartment loan was quite separate from the funding which WHHL was required to provide for the JV. He points out that quite apart from anything else, at the time when the JV was entered into, the loans over the apartments were provided by Tower and there was no obligation on the part of the plaintiff to refinance those loans. Therefore, while the JV was present in the background at the time when the parties entered into the apartment loans, that was the limit of any linkage that those loans had to the JV. All this, Mr Allan submitted, was demonstrated by the description of the JV arrangements which is to be found in the judgment of Woodhouse J in CIV-
2011-404-5801. If that is so, he further submitted, anything that the plaintiff may have done in relation to the apartment loan including the claimed impairing of the security for that loan could not possibly be construed as a breach of the JV arrangements and therefore the whole issue of the joint- venture is irrelevant to the present claim and Mr Ivil has no counterclaim originating in the JV agreement which he can use as the basis for a claimed equitable set-off and answer to the plaintiff’s summary judgment application. I accept that argument. This rules out an arguable defence on the ground of an equitable set-off.
[48] It was also asserted for the defendant that the plaintiff is in breach of its JV obligations because it has not performed the contract to develop Marine Resort notwithstanding the fact that WHHL has served a notice on it making time of the essence for that to occur. However, Woodhouse J concluded in his judgment in CIV-2011-404-5801 that WHHL was not ready and able to perform its obligations because of lack of funding and because it was not in a position to transfer townhouses to the project which it was required to do after first clearing the mortgages over those properties. If anything the position is clearer at this point of time. The company is now in liquidation and plainly does not have the ability to perform the contract. Any right of damages that WHHL might have is very uncertain. It cannot be described as being anything
more than a possibility that such a claim might now be brought for the reasons just described.
[49] The plaintiff also argues that Mr Ivil was not actually a party to the joint-venture arrangements and therefore cannot have any rights of action arising from the breach of that arrangement. I agree with that submission.
[50] In my view the proposed bases for counterclaim are weak and do not pass muster as a defence which the defendant ought to be able to take to trial.
[51] But the decisive point that the plaintiff put forward in response is that in putting forward an equitable set-off, Mr Ivil is contravening the postponement provision in the deed21 which provides that until the indebtedness has been paid in full the guarantor shall not –
exercise any rights (including rights of set-off)...
[52] It was the submission of plaintiff’s counsel that this kind of postponement clause is common. Counsel submitted the following:
The right of subrogation only arises when the guarantor has paid the creditor, and the principal debt has been satisfied…22once the creditor has been fully paid a guarantor is entitled to share in the securities to the extent of that guarantors payment of the debt23…payment of the whole principal debt or discharge of the principal obligation is a condition precedent to the remedy of subrogation.24
(footnotes in submissions)
[53] I accept that submission.
[54] It was beyond dispute that the defendant in this case has not paid and discharged in full his indebtedness to the plaintiff and I therefore accept that cl
4(b) bars any of the proposed counterclaims.
21 Clause 4.
22 James O’Donovan and John Phillips The Modern Contract of Guarantee (2nd ed, Sweet & Maxwell, Great Britain) at 12.270.
23 At 12.271.
24 At 12.278.
Oppression under The Credit Contracts and Consumer Finance Act 2003
[55] The essence of this ground of opposition is described in the following
extract from Mr Bogiatto’s single submission on the point:
15. The defendant relies on the circumstances relating to the release and impairment of the security and the loss of the right of subrogation for the Court to exercise its discretion under section 120, namely where the plaintiff creditor is seeking to exercise a right of power conferred by a contract or transaction in an oppressive manner.
It is submitted that the circumstances give rise to an arguable defence and the real question to be tried on an affirmative defence of oppression.
[56] No evidence was produced in support of the assertions that the defendant makes. While it is not incumbent on the defendant to prove its defence, unless the matter is one that the Court can infer from the circumstances could give rise to a defence, then some evidence would be necessary.
[57] From the Court’s knowledge of these matters, it has to be accepted that provisions of the kind constituting the guarantor a “principal debtor” are frequently to be found in lending documents. Indeed, from the history of decided cases in this country including Baker v BNZ, it would appear that they have long been a part of the landscape. However, I agree that the inquiry
whether the contract or one of its terms is oppressive is:25
...intrinsically one where all the circumstances of the particular case are necessarily determinative.
[58] However, the specific circumstances of the case cannot be influential on the matter of whether or not a term is oppressive where no evidence is put forward about the specific facts of the individual case which would make it apparent that there was an arguable defence open to the defendant. Simply to assert that the Court has to have regard to the circumstances of the particular
case does not, therefore, advance matters far.
25 Raptorial Holdings Limited (In receivership) v Elders Pastoral Holdings Limited [2001] 1
NZLR 178 (CA) at [55].
[59] If a particular commercial practice comes to the notice of the Court which is long established and commonly conformed to, in the absence of any specific evidence of the kind which Tipping J referred to in Greenbank New Zealand Limited v Haas,26 it is going to be unlikely that the Court will accept that a plaintiff has failed to negative an arguable defence of oppressiveness. That indeed is the position that the Court is left with in this case. In my view
this ground of opposition does not avail the defendant.
[60] It is implicit in the submission that the inclusion in the contract of a provision which circumvented a legal result that would have followed at equity and which had the effect of depriving the defendant of a defence, namely that of a release on the ground of impaired securities, was inherently oppressive. Having regard to authorities such as Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd it cannot be inferred in the circumstances of the present case that there has been a relevant breach of reasonable standards of
commercial practice.27 There is no basis upon which the Court could conclude
that the defendant has an arguable defence under this head.
Defence of equitable fraud
[61] The next defence that the defendant put forward was based upon the doctrine of equitable fraud.
[62] The essential position which the defendant takes is set out in Mr
Bogiatto’s submission to the following effect:
11. The defendant relies on the shield of equitable fraud against the plaintiff who is seeking to enforce a guarantee in the circumstances where it appears that the securities have been impaired, or the right of subrogation of those securities has been lost.
The defendant relies on the circumstances relating to the impairment or prejudice of the securities to support the arguable defence of equitable fraud.
A defence of equitable fraud, it is submitted is, raises a real question to be tried as between the plaintiff and the defendant.
26 Greenbank New Zealand Limited v Haas [2000] 3 NZLR 341 (CA) at [24] – [25].
27 Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC).
[63] Mr Bogiatto said that this type of defence is exemplified by the decision in Kitchen v Royal Air Force Association.28
[64] Kitchen was a case where a widow sought legal advice concerning the death by accident of her husband. The solicitors from whom she obtained advice did not advise her of certain key facts which had occurred in their dealings with other possible parties to litigation. In due course she sought to sue the solicitors for negligence and they sought to invoke limitation defences. The case was principally concerned with whether the failure to issue proceedings timeously had been due to the solicitors’ suppression of concealment of fact. In terms of the relevant statute, deferment of the limitation period could be granted where the defendant had acted fraudulently. The Court of Appeal decision concluded that the relevant fraud was not
restricted to common law fraud,29 and would extend to what they described as
“equitable fraud”. The Court of Appeal concluded that the plaintiff had been entitled to rely upon the solicitors to look after her interests and it was in breach of their confidence that they concealed facts which would undoubtedly, if disclosed, have brought to light what her true rights against the solicitors
were.30
[65] Other cases to which Mr Bogiatto referred were similarly concerned with duties owed to the claimant arising out of the vulnerability on his/her part,31 or where there was found, arguably, to be a fiduciary relationship.
[66] As I understand it, the argument put forward by the defendant is that the defendant “relies on the circumstances relating to the impairment or prejudice of the securities to support the arguable defence of equitable fraud”. The case so formulated is too vague and uncertain in its outline to enable it to be
identified as passing muster as an arguable defence that ought to go to trial.
28 Kitchen v Royal Air Force Association [1958] 1 WLR 563 (CA).
29 At 572.
30 At 572.31 Moffat v Moffat [1984] 1 NZLR 600 (CA).
[67] Based upon the authorities to which Mr Bogiatto referred, the Court would not be able to conclude that it has been demonstrated in this case that the defendant has an arguable defence based upon equitable fraud.
The claim for reimbursement of legal costs
[68] Another aspect of the oppressiveness argument concerned the legal costs which the plaintiff claimed in relation to enforcement of the securities that it possessed in relation to the apartments loan.
[69] The legal fees which had been charged to date total $317,297.73. The costs were charged pursuant to the following provision of the loan agreement:
(a) Costs payable by you: You must pay to the lender upon demand,
the lender’s legal costs (as between solicitor and client) for:
(ii) costs on default: legal service arising from or relating to any default under this contract or the enforcement or exercise or attempted enforcement or exercise of any of the lender’s rights, remedies and powers under this contract (including the giving or attempted giving of any notice under the Property Law Act 2007 or any enactment in substitution for that Act, the inspection and valuation of the land and, if the lender is a solicitor’s nominee company, the cost of compliance by the relevant solicitor with the Solicitors Nominee Company Rules 1996 or any similar rules in relation to the matters mentioned in this paragraph (ii));
(iv) legal costs of lender: legal services relating to the protection of the lender’s security interest taken in conjunction with this contract (including the investigation of any claim relating to the land which might affect that interest).
[70] The plaintiff seeks amendment to the prayer for relief by increasing the amount claimed by $22,540, taking the claim from $317,102 to $339,642. While Mr Bogiatto made it plain that his client opposed the claim for legal costs generally, he did not object to the making of such an amendment and I consider that it ought to be permitted and order accordingly.
[71] It was Mr Allan’s submission that
21. The principle that one party may contractually bind itself to pay the other party’s full solicitor/client costs is established.32 This was emphasised in a subsequent Court of Appeal judgment:-33
“…in the case of a contract [giving an indemnity for costs] it must in the end be a matter of determining what recovery is expressly or impliedly intended. In principle, anything less than a full indemnity for costs properly incurred must leave the indemnitee with part of the liability for which the indemnifier is prima facie responsible (Simpson & Miller v British Industries Trust Ltd) (1923) 39 TLR 286,289). In the absence of a contrary indication it is not to be assumed that the parties intended such a result. Nor can there ordinarily be any room for the exercise of a judicial discretion to order less costs and thereby erode the contractual protection the indemnity was intended to provide. A contractual obligation of that kind is enforceable unless contrary to public policy and, as in ANZ Banking Group (NZ) Ltd …, we are unable to see how requiring the Beechers in this to meet all costs (calculated on a solicitor/client basis) properly incurred by Mr Mills in relation to the performance of the indemnity under cl 20 could be said to impede the administration of justice or otherwise be contrary to any discernable public policy considerations.”
22. Where the entitlement to indemnity costs is contractual and the Court is exercising its power under Rule 14.6(4)(e), the position is simply different from orders under either of Rule 14.6(4)(a) or (b). Assessing whether indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:- 34
(a) What tasks attract indemnity costs on a proper construction of the contract.
(b) Whether the tasks undertaken were those contemplated in the contract.
(c) Whether the steps undertaken were reasonably necessary in pursuance of those tasks.
(d) Whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs.
32 Gibson v ANZ Banking Group (NZ) Ltd [1986] 1 NZLR 556 (CA).
33 Beecher v Mills [1993] MCLR 19 (CA)
34 Frater Williams & Co Ltd v Australian Guarantee Corp (NZ) Ltd (1994) 2 NZConvC
191,873 (CA) at 191,886 – 191,887, endorsed by the Court of Appeal in Watson & Son Ltd v Active Manuka Honey Association [2009] NZCA 595 at [20].
(e) Whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.
(footnotes in submissions)
[72] For the defendant, Mr Bogiatto submitted that the costs were un- particularised and that they were excessive.
[73] The issue concerning particularisation can be dealt with first. The submission that the bills were not properly particularised was not elaborated in any detail. The bills contained the usual level of narration that is customary in the notes. That which Mr Dale issued 13 December 2011 is typical of his invoices describing the services rendered in the following terms:
My fee for sundry professional attendances since 27 October 2011 including extensive correspondence with you, drafting statement of defence and extensive correspondence with you and Mr Morrison in relation to same.
Extensive discussions in relation to issues including meeting with you and Mr Adams attendances in relation to mediation including correspondence with solicitors and counsel for WHHL
Attendances at mediation on your behalf and subsequent letters reporting on same.
All incidental letters and attendances thereto. My fee in all matters $28,000.
[74] Other invoices which were rendered include accounts for preparation of an injunction application and an application for security for costs. The accounts as well include the costs relating to preparation for the summary judgment hearing which is the subject of this decision.
[75] It is correct that the invoices contain a summary at quite a high level of generality about the work that counsel has undertaken. The question is whether any greater level of detail was required. I think it could be to take a mistaken view of the summary judgment procedure to expect that claims for legal costs need to be supported by full time-cost records and details of every disbursement for invoices, etc.
[76] The Court of Appeal judgment in the case of Australian Guarantee Corp (NZ) Ltd v McBeth concerns a situation which shows some similarities with the present.35 The guarantors of the loan that had been made to a car rental company claimed that there was insufficient detail provided in the summary judgment application and supporting material to establish the accuracy of the calculation of the loss suffered, and in particular setting out the details of the amounts that were received from the sale of vehicles under a security that the financier held.
[77] In the judgment for the Court Greig J made the following comments:36
The summary judgment procedure is a simple expeditious way to enable a plaintiff to obtain judgment when there is no real defence to the claim made. The essence of the procedure is that the plaintiff’s own verification by affidavit of his own statement of claim and the allegations made in it. There has to be a balancing between the right of the defendant to have his day in Court and to have his proper defences explored and the appropriate robust and realistic approach called for by the particular facts of the case… Although the onus is upon the plaintiff there is upon the defendant need to provide some evidential foundation for the defences which are raised. If not, the plaintiff’s verification stands unchallenged and ought to be accepted unless it is paid the wrong.
In this case the appellant quite rightly did not attempt to deal in detail one by one of the vehicles and other assets but asserted and verified its claim overall, accompanied by the documentation which provided the essential support for that.
(footnotes omitted)
[78] In this case there has been no evidence filed by the defendant from a properly qualified person which expressly deals with the issue of the costs which have been incurred.
[79] It is likely that the Court of Appeal in Australian Guarantee Corp would have accepted that there were limits to how far the Court should treat the affidavit of the plaintiffs as conclusive. The Court must exercise care to ensure
that judgment is not being granted in situations where there is reason to
35 Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 (CA).
36 At page 5.
suppose that the affidavit in support of the summary judgment application is incorrect. This is no more than an application of the well-known remarks of Lord Diplock in the case of Eng Mee Yong:37
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
[80] The starting point then is to decide what it is that the plaintiff is required to prove if it is to obtain summary judgment on that part of the application for summary judgment which is based on the claim for legal costs.
[81] In Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd the Court of Appeal concluded that where there is a contractual right to indemnity costs the question for the court is are the costs claimed reasonable in amount in respect of proper and necessary steps to resolve the issue?38
[82] In that same case, Fisher J describe the enquiry that the court makes in the following terms:39
I respectfully agree with the test posed by Robertson J so long as it is understood that the word “reasonable” does not import a discretion in the usual sense. The ANZ Banking case supra established that in principle one party may contractually bind itself to pay the other party's full solicitor-client costs. In such a case the Court must decide what tasks attract a costs indemnity on a proper construction of the contract, whether the task undertaken in the instant case was one of those contemplated in the contract, whether the steps taken were reasonably necessary in pursuance of that task, whether the rate at which they were then charged was reasonable having regard to the principles normally applicable to solicitor-client costs, and whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment. These are all matters of objective assessment.
Some of the foregoing steps can be delegated. A legal practitioner's bill of costs is subject to revision under part VIII of the Law Practitioner's
37 Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 at 341.
38 Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd (1995) ANZ ConvR
247.
39 At page 20
Act 1982, whether at the instigation of the immediate client or at the instigation of any other person who is liable to indemnify the client (see definition of “party chargeable” in s 139 and its use in ss 143(b) and 145). The costs charged must be reasonable having regard to criteria which are now well known and understood in the context of cost revisions under the Act. The party chargeable can normally exercise its right to a costs revision at any time before judgment is given (Law Practitioner's Act ss 145, 146(2) and 151(2)(b)). In a case like the present one, the defendant could therefore seek a costs revision under that Act. If it has not done so, it will be for the Court to decide in each case whether it should consider the bill itself or refer it to a District Council for revision pursuant to s 146. In either case the principles to apply in assessing the bill will be the same.
[83] In Black v ASB Bank Ltd, the Court of Appeal considered the reasons for the conclusion that the Court reached in Frater:40
That is because R 14.6(1)(b) permits the court to order payment of
costs “reasonably incurred”. It follows from the wording of R
14.6(1)(b) that indemnity costs are determined with reference to actual costs, that may be less than the actual costs if the Court considers the
actual costs were not reasonably incurred.
[84] While it does not appear that Fisher J made any reference to the rules when considering the reasonableness of the recoverable legal costs when he gave his judgment in Frater Williams, that may have been because the rules at that time took a different form from the current Part 14 costs rules and did not have any relevance. Such considerations do not affect the applicability of what he said. The Court of Appeal in Frater Williams referred to the requirement for the legal costs to be reasonable having regard to the principles normally
applicable to solicitor/client costs.41 I do not read that part of the Court’s
judgment as being to the effect that a review of the applicable principles will on its own provide the answer in every case
[85] Because the entitlement of the plaintiff was to recovery of reasonable solicitor client costs, there had to be some evidence placed before the Court that the costs actually claimed fell within that description. But the plaintiff has not provided this evidence. The affidavit in support of the application for summary judgment does no more than tell the Court what the legal costs
claimed are.
40 Black v ASB Bank Ltd [2012] NZCA 384 at [77].
41 Frater Williams, above n 40, at 20.
[86] In some cases it will be possible for the Court to take a robust position on the reasonableness of legal charges. That of course could cut both ways and lead to the Court deciding that costs claimed were excessive. In other cases, it will be necessary to keep in mind the observations made by Chambers J in Fitzroy Engineering:42
The courts, in the absence of a taxing regime, are not in a position to assess the reasonableness of a party's actual legal fees. Taxing has never been popular in New Zealand. The present case is a splendid example of the difficulties of assessing reasonableness. Mr Matheson complained to Judge Perkins and complains now that he has never been shown Technix's solicitors' invoices. What work was covered by them? What hourly rate was applied? Notwithstanding the lack of such information, Judge Perkins apparently considered that “the total fees charged … do not appear … to be excessive”. With respect, I cannot understand how any judge could reach an informed decision on the reasonableness of the fees, with no information other than the documents appearing on the court file.
[87] That decision makes it clear that there are practical limits to the Court’s ability to make judgments based upon impression or intuition as to whether legal costs in any particular case are or are not reasonable. While in that case, Chambers J was not dealing with a contractual provision for recovery of costs on an indemnity basis but was rather proceeding under the court’s jurisdiction when making costs orders to order costs on that basis, his remarks are nonetheless instructive when considering the present position.
[88] It seems reasonably clear from the invoices themselves that they were not rendered solely in regard to the summary judgment application. Had they been, then the Court would be very unlikely to agree that the costs were reasonable and would certainly not come to such a conclusion on the basis of the present limited information. But the fact that the legal work extended to other areas such as the mediation and investigation of the possibility of obtaining an injunction may help to explain the level of the fees charged. Even on that assumption, though, there is no basis in the evidence for the Court to
conclude that they were reasonable.
42 Fitzroy Engineering Group Ltd v Technix Group Ltd HC New Plymouth CIV-2003-443-293,
23 January 2004 at [52](a).
[89] I therefore consider that the reasonableness of the legal costs is an open question and that it was open to the defendant to defend the claim for costs. The position then is that the plaintiff has claimed for solicitor client costs but has not been able to establish the quantum of that claim. But it must be entitled to some costs under this heading because there is no argument available to the defendant that would establish the contrary proposition. This is one of those cases where judgment should appropriately be entered for liability on that head of the plaintiff’s claim.
Conclusion
[90] The defendant does not have any arguable defences. It is not arguable that the defendant has been released from the guarantee because the plaintiff impaired the securities and compromised the defendant’s right to subrogation. If it is accepted for the purpose of argument that the plaintiff has surrendered its security, then the defendant has not demonstrated that by surrendering the security and proving as a creditor in the insolvency of the company, it is arguable that the plaintiff has caused injury to the defendant. The defendant does not have an arguable case that anything the plaintiff has done has released him from the guarantee.
[91] It is not arguable that the defendant has a claim of set off against the plaintiff. Any claim of equitable set off is prevented by clause 4 of the deed. It is arguable that the plaintiff is seeking to enforce its guarantee in an oppressive manner. The claim in equitable fraud is too vaguely formulated to pass muster as an arguable defence.
[92] In terms of r 12.3 High Court Rules, judgment for the plaintiff in respect of the legal costs claim is only in respect of liability. The defendant does not have a defence to this claim, but the Court is unable to assess quantum.
Orders
[93] I order the following:
a) The plaintiff is granted summary judgment for the sum
$994,895 (being $1,311,997 less the claimed legal costs of
$317,102) together with interest at 20.7% from 18 March 2013 until the date payment is made;
b)The plaintiff is granted summary judgment for liability only on the legal costs claim, the quantum of the amount to be subsequently determined;
c) The parties are to confer on the question of adjudication of the question of the amount of legal costs. The most efficient way of dealing with that matter is that I hear it. The specific matters that the parties are to consider are the following: :
i)The completion of any interlocutories relating to the costs issue;
ii)The mode in which evidence is to be put before the court for the trial of the quantum issue concerning costs;
iii) Provision of submissions for quantum hearing;
iv) Hearing duration estimate;
d)The registrar is to arrange a telephone case management conference for me to discuss the above matters with counsel.
Costs
[94] The parties should confer on the matter of costs and if they are unable to agree they are to file memorandum not exceeding five pages on each side
within ten working days of the date of this judgment.
J.P. Doogue
Associate Judge
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