Westpac New Zealand Ltd v Claudleigh Estate Limited
[2013] NZHC 2820
•25 October 2013
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2013-412-000349 [2013] NZHC 2820
BETWEEN WESTPAC NEW ZEALAND LTD Plaintiff
ANDCLAUDLEIGH ESTATE LIMITED First Defendant
ANDGEORGE HILARY GALLAGHER Second Defendant
Hearing: 23 October 2013
Appearances: C R Vinnell for Plaintiff
G H Gallagher as Second Defendant on his own behalf and with leave as director on behalf of the First Defendant
Judgment: 25 October 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to plaintiff ’s summary judgment application
Introduction
[1] The plaintiff (“Westpac”) seeks summary judgment in relation to a loan which Westpac made to the first defendant (“Claudleigh”). Repayment was guaranteed by the second defendant (“Mr Gallagher”).
A guaranteed bank loan
[2] The original contractual arrangements between the parties and the balance of the loan account are not in dispute.
[3] Claudleigh was a customer of Westpac.
WESTPAC NEW ZEALAND LTD v CLAUDLEIGH ESTATE LIMITED [2013] NZHC 2820 [25 October 2013]
[4] On 20 March 2008, Mr Gallagher, with solicitor’s advice, executed a
guarantee of Claudleigh’s present and future liabilities to Westpac.
[5] The banking arrangements were the subject of a business term loan agreement entered into by Claudleigh with Westpac on 28 April 2009. The loan agreement specified a credit limit of $975,000 and a term of four years, with further detailed provisions.
[6] As security, Claudleigh granted Westpac a mortgage over a property at Clyde.
[7] In April 2010, Claudleigh defaulted on its loan. Westpac proceeded through default notices to sell the property as mortgagee. In July 2011 it sold the property. A balance of $790,866.67 remained owing to Westpac under the Claudleigh loan.
[8] Westpac demanded payment and discussions followed.
[9] On 28 November 2011, Claudleigh and Mr Gallagher entered a deed of admission and arrangement which contained a number of recitals and operative clauses:
(a) A recital in which Claudleigh and Mr Gallagher acknowledged that they were indebted to Westpac in the sum of $799,235.77 plus interest being the debt owing under the business term loan agreement of 28
April 2009. Mr Gallagher acknowledged that he had guaranteed the Claudleigh debt under his 20 March 2008 guarantee. Claudleigh and Mr Gallagher admitted liability to Westpac for the debt as defined and recorded that they had agreed to repay the debt on the terms set out in the deed.
(b)The operative terms of the deed contained a further admission of liability in the sum of $799,235.77 plus interest from 9 August 2011 and costs. The deed then contained an agreement as to a repayment in full and final settlement, whereby Claudleigh and Mr Gallagher were to repay a settlement sum of $200,000 plus the costs of negotiating
and preparing the deed of admission and arrangement. There were to be six annual payments of not less than $20,000 with a final payment of the balance of the settlement sum on the seventh anniversary of the deed.
(c) A clause that, in the event of a default in payment, the agreement to settle the debt for $200,000 would be at an end and Westpac would have the right to enforce the debt (as defined, being $779,235.77 plus interest).
Default in repayment
[10] The first annual payment of not less than $20,000 was due to be paid by Claudleigh and Mr Gallagher to Westpac by 28 November 2012. Claudleigh and Mr Gallagher failed to make any payment either then or during a further period of grace granted by Westpac to 5 April 2013.
[11] A further extension was then sought by Claudleigh and Mr Gallagher but was refused by Westpac.
[12] Westpac then in May 2013 commenced this proceeding. Claudleigh and Mr Gallagher had still by that time failed to make any payment on account of the debt. The non-payment has continued.
Explanation for non-payment
[13] Mr Gallagher wrote personally to Westpac in December 2012 following his November 2012 default in payment. In that letter he explained that when he had entered into the arrangement in November 2011 he had strong employment possibilities at that time (a “verbal employment offer”) which failed to eventuate. Since that time he had been unable to find suitable employment. He stated that his personal financial position had deteriorated further over the past 12 months or so. He added that he had little or no personal assets and was unable to make payment from his personal resources. He indicated that he had approached the trustees of the family trust which owned a Dunedin property and that the trust was prepared to sell
that property and make a loan sufficient to meet the first payment to Westpac (once legal costs had been clarified) upon sale and settlement of the Dunedin property. He indicated that the property was expected to be listed for sale no later than January
2013. He sought further time to enable the sale of the trust property.
[14] As it transpired, Westpac granted the further period of grace to 5 April 2013 before it commenced the proceeding.
The grounds of defence
[15] Claudleigh and Mr Gallagher filed a notice of opposition which did not strictly meet the requirements of such a document. It referred to the contents of an affidavit sworn by Mr Gallagher. Responsibly, Mr Vinnell did not take any point as to the informality of the notice of opposition.
[16] The grounds of opposition were identifiable in Mr Gallagher’s affidavit
and/or subsequent submissions and are three-fold:
(a) Westpac had been negligent toward Claudleigh and Mr Gallagher in the mortgagee sale process and had failed to obtain the best price reasonably obtainable for the property;
(b) In breach of the deed of omission and arrangement of 28 November
2011, Westpac was demanding payment of costs beyond the costs of negotiating and preparing the deed of admission and arrangement; and
(c) Westpac as creditor failed to issue a Goods and Services Tax (GST)
invoice for Westpac’s costs.
Summary judgment principles
[17] The starting point for a plaintiff’s summary judgment application is r 12.2(1) High Court Rules, which requires that the plaintiff satisfy the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.
[18] I summarise the general principles which I adopt in relation to this application:
(a) Commonsense, flexibility and a sense of justice are required.1
(b)The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.
(c) The Court will not hesitate to decide questions of law where appropriate.
(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.
(e) In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(f) In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation.
(g)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(h)Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required
for the protection of the integrity of the summary judgment process.
1 Haines v Carter [2001] 2 NZLR 167 (CA) at [97].
(i)Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
Discussion
The starting point – the deed of admission and arrangement
[19] The starting point for analysis of the parties’ rights is the 28 November 2011 deed of admission and arrangement for that is when the parties (both legally advised) agreed to the way in which the debt of Claudleigh and Mr Gallagher would be treated for the future.
[20] Westpac’s claim proceeds upon the basis that the deed of admission and arrangement remains in place. Westpac sues for its principal upon the basis of the acknowledged debt of $799,235.77.
[21] By the nature of a summary judgment application, Claudleigh and Mr Gallagher have not provided a statement of defence as such. Their position is to be taken from a combination of Mr Gallagher’s affidavit and the submissions he has filed. Those documents do not put in issue the continuing force of the deed of admission and arrangement. They allege breach of the agreements contained within the deed, and record that the defendants had not cancelled those agreements.
[22] There is no basis on the pleadings or the affidavit evidence before the Court to find an arguable proposition that the deed (of admission and arrangement) has come to an end.
[23] Both Mr Vinnell and Mr Gallagher in their submissions accepted that the deed remains on foot. The difference between them is as to what effect.
[24] I record that the written synopsis for Westpac developed submissions as to why Claudleigh and Mr Gallagher could not lawfully have purported to cancel the
deed of admission and arrangement but it is unnecessary that I analyse the matter in that way. Cancellation is not asserted by Mr Gallagher.
The acknowledgement of debt – estoppel by deed
[25] Claudleigh and Mr Gallagher twice within the deed acknowledged the amount of their debt as being $799,235.77 plus interest. They did so in the recital where there was an express acknowledgement of indebtedness of $799,235.77 plus interest with “the Debt” being defined to refer to that sum. They did so again in the first operative clause where they admitted liability to Westpac “in the sum of
$799,235.77 plus interest from 9 August 2011 and costs”.
[26] The legally binding nature of such acknowledgements is summarised in the
Laws of New Zealand “Estoppel”, where the learned author wrote:2
A party is estopped from denying any specific fact contained in a recital to a deed to which he or she is a party provided it is certain, precise, and unambiguous.
[27] The old decision in Taylor v Knapman illustrates the principle.3 In that case, the recital in a deed contained an acknowledgement that the mortgagor was indebted to the mortgagees at the time of execution of the deed. Although in fact the monies were advanced by the mortgagees separately rather than on a joint account, the parties were estopped from denying that the monies recited in the deed as due on a joint account were so due.
[28] In this case Westpac sues for the precise sum acknowledged in the deed as owing together with interest from 9 August 2011 as provided for in the operative clause of the deed.
[29] Claudleigh and Mr Gallagher are accordingly estopped from asserting that, apart from any continuing right which they may have to settle in terms of the settlement arrangements in the deed, the debt they owe to Westpac is other than the
$779,235.77 plus interest acknowledged in the deed.
2 Laws of New Zealand Estoppel (online ed.) at [64].
3 Taylor v Knapman (1884) 2 NZLR (SC) 265 at 271.
The mortgagee sale
[30] The process of mortgagee sale and receipt of the proceeds of sale had been completed well before the deed was entered into.
[31] Claudleigh and Mr Gallagher are not entitled to assert that the debt obligations in the deed should be reduced on account of any negligence in the mortgagee sale process.
[32] This conclusion, based on estoppel by deed, is reinforced by the express provision within the deed as to full and final settlement. Claudleigh, Mr Gallagher and Westpac agreed by that provision that there was a full and final settlement of the debt on the detailed terms contained in the deed. Claudleigh and Mr Gallagher had taken their issues to the negotiating table before the deed was executed and, having fully and finally settled on the deed’s terms, cannot seek to raise old arguments again.
[33] It is unnecessary to examine further the defendants’ allegations of negligence.
The costs of negotiating and preparing the deed of admission and arrangement
[34] By the terms of the deed, Claudleigh and Mr Gallagher would have been entitled to treat their liability as at an end if they had paid the agreed settlement sum of $200,000 plus the costs of negotiating and preparing the deed.
[35] Matters have not proceeded down the path of the “$200,000 plus negotiating costs”. Claudleigh and Mr Gallagher failed to make even the first $20,000 principal payment due on 20 November 2012.
[36] Claudleigh and Mr Gallagher assert that Westpac ought not to obtain judgment against them because the invoices provided by Westpac’s solicitors, Anthony Harper, appear to include some historic costs.
[37] The evidence is that Anthony Harper presented fee invoices totalling
$7,631.70. They covered the period from 15 July 2011 to the execution of the deed.
A senior manager within Westpac gave reply evidence to which she attached correspondence. The correspondence indicates that when the solicitors for Claudleigh and Mr Gallagher took issue with costs of $7,631.70 for negotiating and preparing the deed, Westpac offered to accept a reduced figure of $3,287.17 in March 2013. Neither that sum nor any other sum was paid as required within the extended period (before 5 April 2013).
[38] If Claudleigh and Mr Gallagher contended that a sum lower than $3,287.17 was all that was properly payable, they should have paid or tendered that sum along with the $20,000 also due. They did neither.
[39] The ground of opposition in relation to the quantum of costs is accordingly without merit. A lower sum than first sought was agreed to but still not paid. Nor was the $20,000 principal paid. Westpac was entitled to enforce the debt in terms of the deed of admission and arrangement.
Invoice requirements
[40] Clause 2.2(b) of the deed provided:
In addition to the first payment of $20,000, the debtors agree to pay the costs of negotiating and preparing this Deed of Admission and Arrangement. The creditor will issue an invoice for these costs to the debtors upon execution of this Deed of Admission and Arrangement
[41] When Westpac’s solicitors returned the deed to Mr Gallagher’s solicitors by
letter dated 2 December 2011, they also provided copies of the invoices totalling
$7,631.70. They stated:
Our client confirms that its costs in relation to this matter are $7,631.70. We
enclose copies of all the invoices rendered to our client for your records.
[42] They went on to add that the first payment due on 28 November 2012 would therefore be “not less than $27,631.70”. That figure was arrived at through the addition of the costs to the first $20,000 instalment.
[43] The letter to Mr Gallagher’s solicitors was posted to their PO Box.
[44] Mr Gallagher has suggested that he never received at the time a copy of the deed or of the invoices. In the usual way, that would be a matter between him and his solicitors, to whom the December 2011 letter was sent. Mr Gallagher has chosen to call no evidence from the solicitor involved. There is no evidential basis on which to conclude the correspondence, including the fee invoices, was not received at the time.
[45] When Mr Gallagher wrote his letter of explanation for non-payment to
Westpac in December 2012,4 he included the following comment as to legal fees:
I have not received any details of these legal costs. I must point out that the only legal costs I am liable for is specifically the legal costs of negotiating and preparing the Deed of Admission and Arrangement. I refer you to clause
2.2 of the agreement.
In addition Clause 2.2(b) clarifies that the creditor (Westpac) will issue an Invoice in this respect. To date there has been no invoice issued by Westpac that I am aware of.
[46] Correspondence, including negotiations partly conducted on a without prejudice basis followed.
[47] Mr Gallagher protested that Westpac was not providing a GST invoice of its
own (rather than simply providing copies of Westpac’s solicitors’ relevant fee notes).
[48] The correspondence led to Westpac, through its solicitors, making the offer to accept the lower sum of $3,287.17 on account of the costs but Westpac did not supply its own invoice.
[49] When Mr Gallagher paid neither the first instalment of $20,000 nor any sum on account of the deed preparation costs, Westpac’s solicitors wrote to Mr Gallagher’s solicitors on 9 April 2013 advising that the settlement agreement was at an end and that Westpac would be proceeding with summary judgment in accordance
with the deed.
4 See above at [13].
[50] Mr Gallagher submits that Westpac has no right to call for payment of the acknowledged debt as Westpac was in breach of the settlement agreement within the deed, by reason of a failure to provide a Westpac GST tax invoice.
[51] Within the deed (in clause 2.6) the parties had recorded that the agreement was without prejudice to Westpac’s rights to enforce the debt. They further provided that if the debtors defaulted on any of the payments required under the settlement agreement or if Mr Gallagher was adjudicated bankrupt, then Westpac would be entitled to proceed with recovery action in relation to the balance of the debt plus interest and costs. In such event it was stipulated that the agreement to settle the debt would be at an end.
[52] It was these provisions which Westpac invoked when its solicitor advised Mr
Gallagher’s solicitor in April 2013 that the settlement agreement was at an end.
[53] Whether at that time Westpac had failed to provide a form of invoice which complied with the requirements of the deed is not in point. The settlement agreement was at an end at least because of the failure by the debtors to pay the first instalment sum of $20,000. That event alone was sufficient to entitle Westpac to proceed with recovery of the debt as defined in the deed.
[54] If the debtors’ only failure of payment had related to the deed preparation costs and if the Court had found that there was an arguable failure by Westpac in relation to providing an invoice, the argument pursued by Mr Gallagher may have had some force and merit. But by reason of the failure to pay another required payment (the first $20,000 instalment) Westpac’s rights to proceed to recover the full debt are established beyond argument.
[55] In the circumstances, I do not need to reach a conclusion as to the validity of Mr Gallagher’s submission that the solicitors’ invoices forwarded to Mr Gallagher’s solicitors were an insufficient compliance with the requirements of the deed and therefore a breach by Westpac. That submission turns on whether Westpac, by having its solicitors forward the solicitor’s invoices, had strictly speaking “issued an invoice”. I consider there is strength in Mr Vinnell’s response namely that it is clear
beyond argument that Westpac, in having its solicitor forward the invoices in question, was sending to the debtors a document which notified them of an obligation to make payment.5 Mr Vinnell submitted that the agency of Westpac’s solicitors in making such demand was plain.
[56] I recognise the force of Mr Vinnell’s submissions. But it is unnecessary by reason of my earlier finding to decide the application with regard to this point and I do not do so.
Outcome
[57] Westpac has established that the defendants have no arguable defence to the claim for principal and interest. Westpac is entitled to recovery of the debt admitted in the deed of admission and arrangement together with the interest calculated from
9 August 2011 at the rate established in evidence, namely 15.45 per cent.
[58] In its statement of claim Westpac sought costs on a solicitor/client basis but
Westpac through counsel now indicates that it seeks costs on a 2B basis.
Orders
[59] I order:
(a) There is judgment for the plaintiff against the defendants jointly and severally in the sum of $799,235.77 together with interest to the date of judgment;
(b)The plaintiff is to file and serve within five working days an affidavit setting out the calculation of interest to the date of judgment, to which the defendants may file a memorandum in response if they wish
within five working days after service of the affidavit;
5 See the definition of “invoice” in Goods and Services Tax Act 1985, s 2.
(c) The defendants are to pay the plaintiff ’s costs of the proceeding on the basis of the plaintiff’s reasonable solicitor/client costs in relation thereto, together with disbursements to be fixed by the Registrar; and
(d)In the event there is not agreement between the parties as to the quantum of costs, memoranda (four page limit) are to be filed and served with the defendants’ memorandum to be filed within five working days after the filing and service of the plaintiff’s memorandum.
Associate Judge Osborne
Solicitors:
Anthony Harper Lawyers, Christchurch
Mr G H Gallagher on his own behalf and with leave on behalf of Claudleigh Estate Ltd
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