Westpac New Zealand Limited v Nicol

[2016] NZHC 172

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2186 [2016] NZHC 172

UNDER	Part 12 of the High Court Rules
IN THE MATTER OF	an application for summary judgment
BETWEEN	WESTPAC NEW ZEALAND LIMITED Plaintiff
AND	MARK THOMAS NICOL Defendant

Hearing:	15 February 2016
Appearances:	D M A Wiseman for Plaintiff Defendant in person
Judgment:	15 February 2016

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:

Simpson Grierson (B J Upton/D M A Wiseman) Auckland, for Plaintiff

WESTPAC NEW ZEALAND LIMITED v NICOL [2016] NZHC 172 [15 February 2016]

[1]      Westpac New Zealand Ltd sues Mr Nicol under a deed of acknowledgment of debt and settlement agreement of October 2010.  The bank is claiming $254,681.98 plus costs and interest.   The bank has applied for summary judgment.   Mr Nicol opposes the summary judgment application.

Background

[2]      The parties to the deed are Westpac and Mr Nicol.  Mr Nicol and his wife had been directors of a company called Wenmar Property Holdings Ltd.  Westpac had lent money to Wenmar under a loan agreement.  Mr Nicol and his wife guaranteed Wenmar’s obligation to Westpac.  Westpac had also made advances to Mr Nicol and his wife personally under a home loan agreement and a credit card facility.  At the time of the deed, Mr Nicol’s total indebtedness to Westpac under these various loans

– that is, the Wenmar loan agreement, the home loan agreement and the credit card facility – came to $275,321.98.  That is the “total indebtedness”.  Under the deed, Mr Nicol admitted his liability to Westpac for the total indebtedness.

[3]      The deed was a compromise.  Westpac agreed that Mr Nicol could pay it the sum of $50,000 by making five annual payments of $10,000.   The first one was payable one year after the date of the deed, plus Westpac’s legal costs for entering into the deed in the sum of $2053.13.  If Mr Nicol paid in terms of the deed he would be released finally from the total indebtedness.

[4]      The deed, however, has a default provision.  Clauses 4.1 and 4.2 of the deed said:

4.1Upon the occurrence of any of the following events, the Debtor’s Total Indebtedness will become immediately due and payable and Westpac should be at liberty, without further notice, to enforce the terms  of this Deed and/or exercise any  rights  and remedies that would be, or have been, available to it but for the existence of this Deed, including the taking of any steps to enforce payment or satisfaction of the Total Indebtedness, or the unpaid or unsatisfied balance of such Indebtedness or any part thereof, together with interest;

(a)       if the Debtor does not observe and perform the covenants or obligations on his part to be performed pursuant to this Deed (time being strictly of the essence) and remain in breach of such covenants or obligations for a period of 7 days;  or

(b)       if, in the reasonable opinion of Westpac, any statement or information provided to Westpac whether before or after the  date  of  this  Deed,  by  the  Debtor  is  found  to  be materially incorrect.

4.2For the avoidance of doubt, Westpac will (in the event of default as described in 4.1(a) and 4.2(b) of this Deed) be entitled to (but is not limited to) enforce the Total Indebtedness by issuing proceedings to recover the Total Indebtedness against the Debtor.

[5]      There are other relevant provisions in the deed.  Clause 6.1 is a non-waiver clause:

6.1No failure on the part of Westpac to exercise, and no delay on its part in exercising, any right or remedy under this Deed will operate as a waiver thereof, nor will single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any right or remedy.   The right and remedies provided in this Deed are cumulative and not exclusive of any rights or remedies provided by law.

[6]      Clause 6.2 deals with how the deed may be amended:

6.2Any provision of this Deed may be amended only if all of the parties hereto agree in writing.  Any waiver or consent by Westpac under any provision of this Deed shall be effective against Westpac only if it is given in writing and may be given subject to any conditions Westpac shall think fit.   Any waiver or consent shall be effective only in the instance and for the purpose for which it is given.

[7]      Clause 10 is an entire agreement clause.  Clause 9 provides for Mr Nicol to pay Westpac costs it incurs in enforcing the deed, but I am not required to deal with that.   Westpac made it clear that it seeks only scale costs, not full solicitor-client costs.

[8]      Mr Nicol made some payments under the deed, but he fell into default.  He made the first payment of $12,053.13 in September 2011.   He paid $2,500 in December 2012.   He paid a further $7,500 in April 2013.   Between February and September 2014 he made eight payments of $80.00 each.   He has not made any payments since September 2014.

[9]      Westpac has separately taken proceedings against Mrs Nicol.   It obtained judgment against her on 15 July 2011.  It says that it has received no payments from Mrs Nicol since it obtained judgment.   Whereas Mr Nicol is solely liable to pay

$50,000 under the deed, as far as the total indebtedness is concerned any payments by Mrs Nicol need to be taken into account.  The bank’s evidence as to non-payment by her is somewhat thin but I am satisfied that she has made no payments since judgment was given against her.

[10]     The bank’s case is that Mr Nicol has made only some payments under the deed (the first instalment on time, the second instalment although part of it was late, only a part-payment of the third instalment and no payments for the fourth instalment).   It refers to cl 4.1 of the deed and says that it is entitled to proceed against Mr Nicol for the total debt, not just so much the balance to make up $50,000.

[11]     During 2015, the bank wrote twice to Mr Nicol about his indebtedness under the deed. An email of 21 April 2015 said this, amongst other things:

As you were aware, the amount outstanding to the bank was for the amount of $275,321.98.  However under the terms of your deed the bank accepted a reduced settlement figure of $50,000 to be paid annually over a period of five years, with full clearance to have been met by September 2016.  To date we have received the amount of $20,640 which leaves a balance owing of

$29,360 unpaid.   The bank will continue to monitor your account at this stage however on the condition that you provide us with an update in May

2015 after your specialist appointment.  … This will allow the bank to make an informed decision to action going forward under the terms of your signed and dated deed.

[12]     An email of 11 June 2015 is in broadly similar terms.

[13]     Clause 4.1 of the deed is an automatic acceleration provision.  It takes effect regardless of whether the bank gives notice to Mr Nicol or not.   Notwithstanding that, it appears from these letters that the bank was prepared to consider requiring Mr Nicol to payment only a total of $50,000.  It seems to have had an open mind about his position.  Possibly the bank may have accepted arrangements to pay off the balance if Mr Nicol had come forward with reasonable proposals to repay the debt. Even though the bank had accepted payments late and seems to have had an open mind as to whether to allow Mr Nicol to repay only under the deed without invoking

the acceleration provision, that does not stand in the way of the bank now suing for the total indebtedness.  That is because of the non-waiver provision in clause 6.1 of the deed.   Simply because Westpac was prepared to extend time for payment and accept late payment, does not stand in the way of the bank now invoking the deed in the light of ongoing non-payment by Mr Nicol.

[14]     Mr Nicol has fallen on hard times.  From his correspondence with the bank, it appears that he has suffered misfortune, including an injury which is said to prevent him from working.  That injury is said to require ongoing monitoring by a specialist. With a loss of earning capacity and health problems he has had a reduced income. He has other ongoing financial obligations in addition to Westpac’s.   Be that as it may, I am concerned to establish what the parties’ rights and liabilities are under the deed.  Mr Nicol’s inability to continue payments is not by itself a defence to a claim that he is in default under the deed.

[15]     The case is really concerned what Mr Nicol did after the bank’s letter of June

2015.  On 26 June 2015 Mr Nicol wrote to the bank.  Part of the letter deals with Mr Nicol’s personal circumstances. He also asks for information as to whether his wife, from whom he is separated, has made any payments.  But he then went on to say this:

The banks debt as I now understand it in relation to a previous debt as mentioned by yourself.

Further to that I would be happy to settle any financial obligation I might lawfully owe, as soon as I have received the following documentation from you:

1.        Validation of the debt (the actual accounting);

2.Verification of your claim against me (a sworn affidavit or a hand signed invoice in accordance with the Bills of Exchange Act 1908, section 23);

3.A copy of the contract signed by both parties and therefore binding both parties.

4.Please  also  provide  me  with  a  true  and  certified  copy  (NOT photocopy) of the Original Note (Credit Agreement), under penalty of perjury and with unlimited liability and confirm that this Note has never been sold.  Please also confirm the name of the individual who is the duly authorised representative from your company, who has carried out the due diligence under the Anti-money laundering and

countering financing of terrorism act 2009 and what actions s/he has taken in relation to this account.

5.Written Verification of the steps taken with regards to one Wendy Constance Nicol (aka Wendy Constance Mallinson aka Wendy Constance Wood), such as but not limited to High Court proceedings naming one Wendy Constance NICOL as sole respondent and the judgment in favour of Westpac Bank in relation to the debt in its totality and any other relevant information regarding this person in the recovery of any debts.

I hereby give you ten (10) days to reply to this notice from the above date and signed under full commercial liability and penalties of perjury, assuring and promising me that all of the replies and details given to the above requests are true and without deception, fraud or mischief.  Your said failure to provide the aforementioned documentation within ten (120) days, from the above date, to validate the debt, will constitute your agreement to the following terms:

1.   That the debt did not exist in the first place;

OR

2.   It has already been paid in full;

AND

3.   That any damages I suffer, you will be held culpable;

4.   That any negative remarks made to a credit reference agency will be removed;

5.   You will no longer pursue this matter any further.

6.   You agree to pay all fee schedules.

[16]     The bank did not reply to that letter or to the further letters I am about to refer to.   There was another letter in similar vein on 7 July 2015.   Mr Nicol wrote on

17 July 2015, again in similar vein.  He headed this letter “Non Negotiable”.

[17]     Finally, he wrote on 27 July 2015.  This letter has a number of headings.  The first one was “Estoppel Notice”.   Below that appears the words “Non-Negotiable” and then there is further wording: “Notice of Irrevocable Estoppel by Acquiescence” and below that “Notice to Agent is Notice to Principal.  Notice to Principal is Notice to Agent”.  The letter is addressed to the Chief Executive of Westpac and was copied to the bank officer with whom Mr Nicol had been dealing.  It is unnecessary to set out the full text of that letter.   Under it Mr Nicol maintains that by reason of the

bank’s failure to reply to his letters and to give the information he had requested, he is now released from all liability to the bank.

[18]     The bank began this proceeding in September 2015.

[19]     The  approach  the  court  takes  on  a  plaintiff’s  application  for  summary judgment is well-established.  The bank cited the familiar passage from the decision of the Court of Appeal in Krukziener v Hanover Finance Ltd:1

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:

… 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:   …   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: … 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: …

(citations omitted)

[20]     Mr Nicol does not contest the fact that he entered into the deed in October

2010.  He does not suggest that at the time it was made the deed was invalid or was not enforceable.  I note that the deed was a compromise.  One option for the bank would have been to have held Mr Nicol liable for the total amount and enforce a claim against him for it, to see what it could get after it obtained judgment.  It was prepared instead to accept a lesser sum with the assurance that it would be paid that amount in full, but with the safeguard that it reserved the right to proceed against him for the total indebtedness if he did default.  In fact, that is what has happened in this case.   Mr Nicol has defaulted.   Even though the bank claims the total indebtedness, a judgment for the unpaid balance of the total indebtedness is unlikely to produce very much for it.

[21]     Mr Nicol has put up legal arguments why his correspondence gives him a defence.  Before considering the legal merits, it is helpful to step back and consider

what Mr Nicol is trying to do.  He has written letters to the bank making demands on

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].

it for information and other assurances and, in default of any responses, he claims to be released from any liability under the deed.  Seen in that light, the matter does not show any attractive reason why he should be released from the deed.  In effect, he is trying to foist a discharge from liability on the bank when the bank did nothing.

[22]     Mr Wiseman has explained the bank’s policy of not replying to the letters that Mr Nicol sent to it.  Mr Wiseman characterised the contents of Mr Nicol’s letters as “pseudo law”.  Pseudo law is an informal term but I understand it to mean language often used by debtors in response to demands by creditors under which legal terms are used without any clear understanding of their significance and without creating any meaningful legal dialogue, or conveying anything meaningful to an intelligent legal mind.  Mr Nichol’s letters do go in that direction although I have to say that I have seen worse. The bank’s policy is not to respond to such “pseudo law”.

[23]     As to the legal basis for his defence, Mr Nicol seems to allege two matters –

variation of contract and estoppel.  I will consider variation of contract first.

[24]     As I have already indicated, for a period it appeared that the bank may have been prepared not to insist on complete timely performance by Mr Nicol, and it may have tolerated some payments being made late under the deed.   The non-waiver clause (cl 6.1) does not prevent the bank, in light of further non-payment, from enforcing the deed against Mr Nicol including its remedies on default.  Nor does that amount to a variation of the deed.   I accept Mr Wiseman’s submission that the criteria for a variation of contract are the same as the criteria for making a contract. He submitted that there needs to be valid and subsisting the existing contract and that the parties must then vary it in the same way as they would enter into a contract originally.  There needs to be offer and acceptance.  There needs to be consensus ad idem.  There needs to be consideration.  There needs to be certainty as to the terms. There needs to be an intention to vary the contract.   None of those matters are arguable in this case.  I see nothing to suggest that by accepting payments late from Mr Nicol the bank was entering into any variation of the contract.

[25]     The  other  alleged  variation  element  is  in  the  correspondence  between

Mr Nicol and the bank in June and July 2015.  The bank maintained its silence in the

face of Mr Nicol’s correspondence.  Silence is a fairly effective way of showing that the terms proposed by the other side are not accepted.  It is trite under the law of contract that silence does not amount to acceptance of an offer.   In this case, the bank’s silence cannot be construed in any way at all as an acceptance of any of the offers by Mr Nicol under which he would be released from the deed.

[26]     Mr Wiseman  referred  to  the  requirement  in  cl  6.2  of  the  deed  that  any variation had to be in writing.  For present purposes, the facts do not disclose any arguable basis for a variation of contract.  Clause 6.2 reinforces that, by indicating that if the bank were to enter into a variation it would have been documented in writing.  The absence of any documentation is a supporting feature for the fact that there is no arguable case for a variation of contract here.

[27]     Mr Nicol also put his argument on the basis of promissory estoppel.

[28]     Mr Wiseman took as the basis for the test for estoppel in New Zealand today the following from Equity and Trusts in New Zealand:2

Although the modern approach is “to depart from strict criteria and to direct attention to overall unconscionable behaviour” it is nevertheless clear that the party alleging an estoppel must show that:

(a)  A belief or expectation has been created or encouraged through some  action,  representation,  or  omission  to  act  by  the  party against whom the estoppel is alleged;

(b) The belief or expectation has been reasonably relied on by the party alleging the estoppel;

(c)  Detriment will be suffered if the belief or expectation is departed from;  and

(d) It  would  be  unconscionable  for  the  party  against  whom  the estoppel is alleged to depart from the belief or expectation.

[29]     The legal position between the parties before Mr Nicol began his letters was that he was in default under the deed and that the bank was entitled to enforce the

deed including the default provision under which it could claim against him for the

2      Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,

2009) at 613 and 614.

unpaid  amount  of  the  total  indebtedness.    The  bank  continues  to  maintain  that

position after Mr Nicol’s letters.

[30]     For the first limb of the test, it has to be arguable for summary judgment purposes that the bank has created or encouraged a belief or expectation that it would not enforce the deed against Mr Nicol.   As already noted, the bank simply did nothing.  By doing nothing it did not create or encourage any expectation or belief on the part of Mr Nicol.   Mr Nicol tried hard in his submissions to create some argument that the bank was under some obligation to him to reply to his letters and he could therefore rely on the absence of any response as giving some ground for him to have a belief or expectation.

[31]     In response, Mr Wiseman pointed out that a belief or expectation might arise out of an omission typically in cases where a party is under some duty to speak.  I cannot find any basis on which Westpac was required to respond to Mr Nicol’s letters, at least in a way that would effective for the law of promissory estoppel.

[32]     Mr Nicol referred in his submissions to a range of legislation – the Privacy

Act 1993, the Anti-Money Laundering and Countering Financing of Terrorism Act

2009, the Consumer Guarantees Act 1993, the Fair Trading Act 1986, the Reserve Bank Act  1989  and  the  Bills  of Exchange Act  1908.   They are  all  completely irrelevant to this question of estoppel.  None of them can affect relations between the bank  and  Mr  Nicol  in  terms  of  establishing  whether  a  defence  of  estoppel  is arguable.

[33]     Mr Nicol no doubt hoped that the bank would not enforce the deed against him, and he tried to get the bank to engage in that hope as well.  But he could not reasonably believe that the bank had joined with his hope when it declined to answer his letters.  In the circumstances, the bank‘s tactical silence may have been the best way of making clear that it was not prepared to engage with Mr Nicol in his attempts to foist his hope on it.

[34]     Another requirement is detriment.  The position before Mr Nicol began his correspondence is the same as his position afterwards.  In both cases he was indebted

for the unpaid balance of the original total indebtedness.  There is no evidence to show that Mr Nicol has relevantly suffered any detriment.  Furthermore, I cannot see how it is unconscionable for the bank to enforce its deed against Mr Nicol.   In considering questions of unconscionability I am not of course required to consider questions of personal financial hardship to Mr Nicol.  There is nothing that makes it inequitable for the bank to enforce its rights under the deed in this case.

[35]     In  short,  I  regard  Mr  Nicol’s  estoppel  defence  as  completely  fanciful. It reflects  wishful  thinking  on  his  part  but  it  has  no  foundation  in  reality. Accordingly, the bank has satisfied me that Mr Nicol does not have an arguable defence to its claim.

[36]     I enter judgment for the bank in the sum of $254,681.98.  Interest will run on that sum at five per cent per annum from the date of judgment to the date of payment.  The bank seeks 2B costs.   It calculates those costs as $15,052.50.  The bank has allowed only a quarter of a day for the hearing but the hearing has taken a half day.   Accordingly I allow the bank an additional $557.50 for costs for the hearing today.  I also award the bank disbursements of $1,595.50.

………………………………….

Associate Judge R M Bell