Westpac New Zealand Limited v Pritchard
[2023] NZHC 1596
•26 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1443
[2023] NZHC 1596
BETWEEN WESTPAC NEW ZEALAND LIMITED
Plaintiff
AND
DAVID MICHAEL PRITCHARD
Defendant
Hearing: 6 June 2023 Counsel:
J J K Spring for the Plaintiff J B Murray for the Defendant
Judgment:
26 June 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 26 June 2023 at 4.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Minter Ellison Rudd Watts, Auckland, Vallant Hooker & Partners, Auckland
WESTPAC NEW ZEALAND LIMITED v PRITCHARD [2023] NZHC 1596 [26 June 2023]
Introduction
[1] The defendant, David Pritchard, was the director of Amicizia Trustees Limited (Amicizia).1 Amicizia was the developer of a unit title development at 46 Middleton Road, Remuera, Auckland (the property).
[2] The development was largely funded by loan advances from the plaintiff, Westpac New Zealand Limited (Westpac) to Amicizia. Westpac’s advances were made by a combination of six separate home loan facilities, and an overdrawn current account. The advances were secured by a mortgage granted by Amicizia over the property (the mortgage), and a personal guarantee from Mr Pritchard of Amicizia’s obligations owed to Westpac.
[3] Construction commenced in 2017. The development did not proceed smoothly. The first building contractor engaged by Amicizia abandoned the site in 2019. There was a delay before Amicizia engaged a second building contractor, and then further delays due to COVID-19. Amicizia fell into dispute with the second building contractor in respect of various matters, including the quality of the work and payments due from Amicizia to the building contractor.
[4] On 14 June 2021, one of the Westpac facilities fell due for repayment, and Amicizia defaulted. The amount due was $287,722.10. Westpac issued a notice to Amicizia under ss 118 and 119 of the Property Law Act 2007 in respect of the default. Amicizia failed to remedy the default, and Westpac exercised its right to accelerate payment of the loan advances. Westpac made demand on Mr Pritchard as guarantor for the total amount then due from Amicizia to Westpac, which stood at $4,934,189.04.
[5] On 11 August 2022, Amicizia signed an agreement to sell the property, by then comprised in two unit titles, to a third party for a price of $3,500,000 (the SPA). On 7 October 2022, Westpac exercised its right as mortgagee, pursuant to s 179 of the Property Law Act, to adopt the SPA.
1 On 21 June 2023 Amicizia changed its name to MTREM Limited. It has since been removed from the Companies Register.
[6] After settlement of the SPA and payment of expenses incurred in respect of the sale, Westpac applied the net proceeds of sale to Amicizia’s overdrawn current account and loan facilities. There was a shortfall, and Westpac alleges that the sum of
$1,798,421.63 remains outstanding. Westpac seeks summary judgment against Mr Pritchard for that amount, together with interest and indemnity costs, relying on Mr Pritchard’s personal guarantee.
[7] Mr Pritchard is unhappy about various aspects of Amicizia’s banking relationship with Westpac. His various objections can be grouped into two categories:
(a)complaints that Westpac influenced, or interfered in, Amicizia’s construction contracts and engagement of a quantity surveyor, to Amicizia’s detriment; or
(b)challenges to the quantum of the debt owed to Westpac, including the calculation of interest, the disbursements paid by Westpac, and the application of the proceeds of sale of the property.
Procedural background
[8] The application for summary judgment was filed in August 2022, and first called in Court on 18 October 2022. The day prior to that hearing, Mr Pritchard filed a notice of opposition and an affidavit in support. The notice of opposition was filed by Bruce Murray of the firm Vallant Hooker & Partners.
[9] On 18 October 2022, the Court ordered that Westpac file and serve any updating evidence by 4 November 2022, and that Mr Pritchard file and serve any response by 25 November 2022. The application for summary judgment was set down for a half day hearing on 23 February 2023.
[10] The hearing proceeded on 23 February 2023, before Associate Judge Taylor. Mr Murray did not appear, and Mr Pritchard appeared on his own behalf. At Mr Pritchard’s request, the application for summary judgment was adjourned to enable Mr Pritchard to instruct counsel. The time for Mr Pritchard to file any further affidavit evidence was extended to 17 March 2023.
[11] Westpac’s updating evidence took the form of an affidavit from Nicholas Hale, a director in Westpac’s credit restructuring group. The affidavit was sworn on 4 November 2022. Mr Pritchard has not filed any further evidence.
[12] The hearing of Westpac’s application for summary judgment proceeded on 6 June 2023. On the morning of the hearing, at 7.59 am, a Mr Matthew Blomfield sent an email to the Court which included a copy of an ACC medical certificate in respect of Mr Pritchard. Mr Blomfield purported to lodge the medical certificate in his capacity as a McKenzie friend of Mr Pritchard.
[13] The medical certificate was provided by Auckland Hand Surgery Associates and was dated 30 May 2023. It certified that Mr Pritchard was unfit for work for the period 30 May 2023 to 30 June 2023. No further information has been provided regarding Mr Pritchard’s state of health. The email from Mr Bloomfield asserted that Mr Pritchard’s doctor had told him that he should have bed rest, but there is no medical certificate to support that assertion.
[14] When the application for summary judgment was called at 10 am on 6 June 2023, Mr Pritchard did not appear. Neither did the solicitor on the record for Mr Pritchard, Mr Murray. The proceeding was stood down while the Registry contacted Mr Murray.
[15] The matter was recalled at approximately 10.30 am, and Mr Murray appeared by VMR. Mr Murray advised the Court that he did not have current instructions from Mr Pritchard, and he was unable to offer any submission on Mr Pritchard’s state of health. Mr Murray was offered the opportunity for the proceeding to be stood down so that he could obtain further instructions. Mr Murray declined that opportunity.
[16] In the absence of an adequate explanation as to Mr Pritchard’s current state of health or ability to participate in a Court proceeding, I directed that the hearing of Westpac’s application for summary judgment proceed.
Summary judgment principles
[17] The Court may give judgment against a defendant if satisfied that the defendant has no defence to a cause of action in the statement of claim.
[18] The leading authority on applications for summary judgment is Krukziener v Hanover Finance Ltd.2 The Court of Appeal set out the following principles:3
(a)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.
(b)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.
(c)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. 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.
[19] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.4
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
3 At [26].
4 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
[20] It is well established that if the defendant fails to provide an evidential foundation for a defence, then the plaintiff’s verification of the statement of claim stands unchallenged and ought to be accepted, unless it is patently wrong.5
Complaints that Westpac influenced, or interfered in, Amicizia’s construction contracts and engagement of a quantity surveyor, to Amicizia’s detriment
[21]In his notice of opposition, Mr Pritchard takes issue with three acts by Westpac:
(a)Westpac’s requirement that the first and second building contractors be engaged on fixed price construction contracts. Mr Pritchard states that the circumstances that existed when Amicizia entered into the second construction contract required it to be a “charge-up contract”. The implication is that Westpac wrongfully prevented Amicizia from entering into a charge-up construction contract.
(b)Westpac’s requirement that Amicizia engage a quantity surveyor.
(c)Westpac’s requirement that Amicizia continue with its contract with the second building contractor, when breaches by that contractor justified Amicizia terminating the contract.
[22] On behalf of Westpac, Mr Hale gave affidavit evidence which confirmed that it was a requirement of Westpac that both the first building contractor and the second building contractor be engaged on a fixed price contract, and that Westpac did require that Amicizia appoint a quantity surveyor in or about September 2018, when Amicizia was requesting further funding from Westpac.
[23] Westpac’s requirements were conditions imposed by Westpac on its offers of finance.
[24] Mr Pritchard’s affidavit evidence does not expand on the grounds set out in his notice of opposition. In his affidavit, he sets out criticisms of both building contractors’ performance of their obligations under the construction contracts.
5 Australian Guarantee Corp (NZ) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 58–59.
However, there is no evidence to support an allegation that the construction contracts should not have been fixed price contracts.
[25] Mr Pritchard’s evidence is that in April 2021, when Amicizia was in dispute with the second building contractor, he wanted to cancel the construction contract, “but the bank told me Amicizia had to keep going”. Mr Hale did not respond to this assertion by Mr Pritchard.
[26] I am satisfied that Mr Pritchard does not have an arguable defence to Westpac’s claim based on an allegation of influence or interference by Westpac in Amicizia’s contracts with the builders and the quantity surveyor.
[27] First, Mr Pritchard’s notice of opposition does not articulate how Westpac’s requirements for fixed price construction contracts and engagement of a quantity surveyor constitute a breach of any legal obligation owed by Westpac to Amicizia, that might give rise to a set-off. Westpac was entitled to impose conditions on its offers of finance. Amicizia was not obliged to accept those conditions, but it chose to do so to obtain the finance.
[28] Secondly, Mr Pritchard has failed to discharge the evidential onus on him in respect of these matters. It is not enough to criticise commercial decisions of Westpac. Mr Pritchard has not produced any evidence of a breach of an obligation owed by Westpac to Amicizia or adverse consequences that flowed from that.
[29] There is no contemporaneous documentary evidence of any complaint by Amicizia to Westpac that Westpac prevented Amicizia from exercising its contractual rights against the second building contractor.
[30] Amicizia instructed solicitors regarding its dispute with the second building contractor. Amicizia had access to legal advice regarding its rights of cancellation of the construction contract, including any issue that might have arisen regarding Westpac’s ability to prohibit cancellation.
Challenges to the quantum of the debt owed to Westpac, including the calculation of interest, the disbursements paid by Westpac, and the application of the proceeds of sale of the property
[31]In his notice of opposition, Mr Pritchard challenges quantum on three grounds:
(a)That there is insufficient evidence to establish Westpac’s calculations of interest, including ordinary and penalty interest rates and the periods those rates were applied.
(b)That there is insufficient evidence of the costs and fees, including legal costs and valuer’s costs, deducted from the proceeds of sale of the development property, or otherwise appropriated by Westpac.
(c)That there is insufficient evidence of how the proceeds of sale of the development property were applied.
[32] After Mr Pritchard filed his notice of opposition and affirmed his affidavit, Mr Hale filed his updating affidavit on behalf of Westpac which produced copies of all relevant bank statements; a graph showing the movements in interest rates applicable to each facility over time, including the default interest rate; the SPA and source documents relevant to the price received; the disbursements met from the proceeds of sale; and the allocation of the net proceeds of sale.
[33] Mr Pritchard has failed to file any further evidence commenting on or challenging the documentary evidence produced by Mr Hale in his affidavit.
[34] In light of the comprehensive documentary evidence that has now been provided by Westpac, Mr Pritchard has failed to discharge the evidential onus on him regarding challenges to the quantum of the debt now outstanding to Westpac.
Interest
[35] Westpac seeks interest at the contractual rate for the period 12 July 2022 to 31 October 2022. This interest charge is included in the account statements dated 9 September 2022 and 1 November 2022 produced by Mr Hale, and therefore in the
judgment sum of $1,798,421.63. No further award of interest for this period is required.
[36]Westpac makes two further claims for interest:
(a)for the period from 1 November 2022 until the date of hearing on 12 June 2023, at the rate prescribed by the Interest on Money Claims Act 2016, totalling $43,771.62; and
(b)a declaration that interest continues to accrue on the judgment sum from 13 June 2023 until the date on which the judgment is satisfied, at the rate prescribed by the Interest on Money Claims Act.
Result
[37] Judgment is given for the plaintiff against the defendant for the following amounts:
(a)the sum of $1,798,421.63, being the amount outstanding on 31 October 2022 (the judgment sum);
(b)interest of $43,771.62 for the period from 1 November 2022 to 12 June 2023 pursuant to the Interest on Money Claims Act 2016; and
(c)interest on the judgment sum from 13 June 2022 to the date of payment pursuant to the Interest on Money Claims Act 2016.
[38] The defendant shall pay the plaintiff’s costs and disbursements on an indemnity basis pursuant to cl 2.3 of the mortgage.
[39] The plaintiff shall file a memorandum as to the calculation of indemnity costs within 10 working days of delivery of this judgment, including supporting invoices.
Associate Judge Brittain
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