WKB Limited v W.K. Backhouse Limited HC Wanganui CIV-2006-483-395
[2007] NZHC 1731
•11 May 2007
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV-2006-483-395
BETWEEN WKB LIMITED Plaintiff
ANDW.K. BACKHOUSE LIMITED First Defendant
ANDSIMON NICHOLAS ROWLAND-JONES AND BELINDA SUSAN ROWLAND- JONES AS TRUSTEES OF THE ROWLAND-JONES FAMILY TRUST Second Defendants
ANDSIMON NICHOLAS ROWLAND-JONES Third Defendant
AND NOEL PATRICK BOYLE Fourth Defendant
Hearing: 9 May 2007
Appearances: J Polson for Plaintiff
G.A. Paine for First and Fourth Defendants
Judgment: 11 May 200711 May 2007 at 3.15 pm
In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 3.15 pm on the 11th day of May 2007.
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Introduction
[1] On 17 November 2006 the plaintiff applied for summary judgment against:
WKB LIMITED V W.K. BACKHOUSE LIMITED AND ORS HC WANG CIV-2006-483-395 11 May 2007
a) W.K. Backhouse Limited, the first defendant, as defaulting debtor under an agreement for sale and purchase of a business.
b)The Rowland-Jones Family Trust (second defendant) which guaranteed payment of the principal debt.
c) Simon Rowland-Jones (the third defendant) who it is said guaranteed payment of the principal debt and interest, and indemnified the plaintiff for all losses and expenses associated with default by W.K. Backhouse Limited.
d)Noel Boyle, the fourth defendant, who again is said to have guaranteed payment of the principal debt and interest and granted an indemnity for all losses and expenses associated with default by W.K. Backhouse Limited.
[2] As to para [1](b) above, the second defendant, the Rowland-Jones Family Trust, has made a payment to the plaintiff of the principal debt and the proceedings against the Trustees of the Trust were discontinued around 19 January 2007.
[3] As to para [1](c) above, the third defendant Simon Nicholas Rowland-Jones has filed an admission of claim dated 19 March 2007 and judgment for the amount specified in that admission of claim can now be entered against him. An order to this effect is to follow.
[4] On 28 February 2007, both the first defendant W.K. Backhouse Limited and the fourth defendant Noel Boyle filed a Notice of Opposition to the plaintiff’s summary judgment application, together with an affidavit of Mr Boyle in support.
[5] It was that summary judgment application against the first defendant and the fourth defendant which was argued before me on 9 May 2007. I will turn shortly to address that matter.
Order against third defendant
[6] But first, so far as the summary judgment application against the third defendant is concerned, pursuant to the admission of claim dated 19 March 2007 and filed 21 March 2007, judgment is now entered in favour of the plaintiff WKB Limited against the third defendant Simon Nicholas Rowland-Jones in the following amounts:
a) $30,249.19, being the outstanding monthly interest in relation to the purchase price debt of $138,249.17 from 31 December 1999 to 31
October 2006;
b)$518.43, being the outstanding interest in relation to the purchase price debt from 1 November to 31 November 2006 (after which the purchase price debt was paid and interest ceased to accrue);
c) $142,879.29, being the judgment sum for category 2 stock;
d)Interest on the sum of $142,879.29 referred to in paragraph [6](c) above, calculated at the rate of 7.5% per annum under s87 of the Judicature Act 1908 (or $29.36 per day) from 17 November 2006 (the date of issue of these proceedings) until the date of payment; and
e) Costs in the sum of $24,275.09, being costs and disbursements of and incidental to this proceeding on a solicitor/client basis to 14 March
2007.
Background Facts
[7] Before turning to consider the summary judgment application against the first and fourth defendants, it is useful to set out certain background facts.
[8] On 25 June 1999 the plaintiff WKB Limited entered into a written sale and purchase agreement (“the sale agreement”) with the first defendant as purchaser for the plaintiff’s clothing manufacturing business in Wanganui.
[9] The settlement date under the sale agreement was 29 June 1999, although a large proportion of the purchase price was to be paid over a period of five years from that date, together with interest from 1 April 1999 until final payment.
[10] In addition, on settlement date the parties were to identify and agree on the purchase of additional stock (“category 2 stock”) which was to remain in the ownership of the plaintiff and be stored in a separate location until requisitioned and paid for by the first defendant.
[11] At the time the sale agreement was signed, the second defendants as trustees of the Rowland-Jones Family Trust and both the third defendant and the fourth defendant as directors of the first defendant, executed joint and several Deeds of Guarantee and Indemnity (“the Guarantees”) which unconditionally and irrevocably guaranteed to the plaintiff the due and punctual payment of the unpaid purchase price and all other moneys under the sale agreement. The Guarantees went on to provide that these parties as guarantors were to indemnify the plaintiff for all losses and expenses which it might incur as a result of any failure by the first defendant to comply with any of its obligations under the sale agreement.
[12] Although it is not relevant for the present summary judgment application argued before me, the liability of the second defendant the Rowland-Jones Family Trust’s under the guarantee was to be limited to land owned by the Trust over which it had executed a mortgage in favour of the first defendant to secure the balance purchase price.
[13] The total purchase price finally agreed under the sale agreement between the parties appears to be $685,000.00, of which an initial deposit of $50,000.00 was paid, together with certain other payments made between February 2000 and July
2005.
[14] According to the plaintiff, by 31 July 2005 the first defendant had paid the plaintiff a total of $364,350.00 pursuant to the sale agreement, which the plaintiff applied:
a) As to $226,070.00 in payment of the purchase price debt.
b) As to $138,280.00 in payment of interest on the purchase price debt. [15] At 31 July 2005 the plaintiff says the outstanding purchase price debt stood at
$408,930.00, and interest on this purchase price debt at $22,242.56.
[16] Then, around 7 July 2006, the second defendant Trust paid $270,680.83 to the plaintiff pursuant to its guarantee, reducing the purchase price debt to
$138,249.17.
[17] And on about 15 December 2006 the second defendant made a further payment to the plaintiff of this outstanding principal debt of $138,249.17. As a result, the proceedings against the second defendants were discontinued on about 19
January 2007.
[18] The plaintiff now seeks judgment against the first defendant and the fourth defendant for:
a) $173,647.91 representing the same amounts as the third defendant has admitted liability for, as noted in the order made at paras [6](a), (b) and (c) above.
b) $5,138.00 being interest on the category 2 stock judgment sum from
17 November 2006 to 9 May 2007 at 7.5% per annum under s 87
Judicature Act 1908 (175 days at $29.36 per day).
c) Costs and disbursements calculated on a solicitor/client basis of
$12,512.83.
Counsel’s Arguments and My Decision
[19] In seeking summary judgment the plaintiff relies upon r136 High Court Rules which states:
The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular part of any such claim.
[20] Under r136 the onus is clearly on the plaintiff to satisfy the Court that the defendant has no defence to the claim – Pemberton v Chappell [1987] 1 NZLR 1.
[21] Although a Court must be cautious in summary judgment applications, a
Judge is not bound:
To accept uncritically, as raising a disputed 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
– Eng Mee Young v Letchumanan [1980] AC 331 at 341.
[22] Thus while it is for the plaintiff to show that its case is unanswerable and that the defendant has no arguable defence, the Court ought to assess any defence or a narrative presented by the defendant in a “robust and realistic” manner – Bilbie Dymock Corporation v Patel (1987) 1 PRNZ 84 (CA) at 85.
[23] In the present case, the only material put forward on behalf of the first defendant or the fourth defendant in opposition to the plaintiff’s application was that contained in the affidavit of the fourth defendant Mr Noel Boyle dated 28 February
2007.
[24] The thrust of the fourth defendant’s contentions in that affidavit, in my view, does not in any real way contest liability on the part of the first defendant or the fourth defendant. There is no dispute raised as to the first defendant’s liability as purchaser under the sale agreement nor the fourth defendant’s liability under the guarantees or their enforceability.
[25] Paragraph 6 of Mr Boyle’s affidavit deposes simply to confusion over the figures and quantum of the plaintiff’s claim.
[26] Paragraph 11 of the affidavit states:
I have made an offer to settle this matter, which was based on my understanding of the figures. It seems to have been rejected, although it is
unclear as to on what basis, and it is also unclear as to whether or not the Plaintiff is only pursuing me and the First Defendant, in which case I will immediately need to issue proceedings against the Second and Third defendants for contribution to any settlement or any judgment that may be obtained.
[27] In addition, paragraph 12 of this affidavit states:
12.It would seem to me that this matter either needs to have a full Hearing so that the figures can be either agreed upon or ruled upon by a Court with the accounting evidence being made available. Alternatively I am advised that a settlement conference may well achieve the same purpose. (Emphasis added)
[28] Finally, paragraph 13 of the affidavit refers to a defence being available:
“with respect to how much is due and owing, how much the Plaintiffs are recovering from the Second and Third defendants which of course would minimise any liability that they could claim from the First and Fourth defendants……”
[29] Before me Mr Paine for the first defendant and the fourth defendant put forward no real arguments to dispute the question of liability on the part of either the first defendant as principal debtor or the fourth defendant as guarantor.
[30] Effectively, the only issues raised at all on behalf of the first defendant and the fourth defendant related to quantum questions.
[31] The plaintiff’s position on this aspect is that there can be no issues in dispute regarding each of the quantum claims made by the plaintiff. The plaintiff submits that with the admission of its claim as to these amounts by the third defendant, as I have noted at para [6] above, and given what are described as flimsy arguments advanced in opposition to its quantum claims, the Court should take a robust approach and grant the summary judgment sought here against these remaining defendants. I turn now to consider these arguments.
[32] As I have noted above, the $138,249.17 owing in respect of the outstanding purchase price under the sale agreement has already been paid.
Outstanding monthly interest in relation to the purchase price debt
[33] The first amount claimed by the plaintiff is for interest of $30,249.19 representing interest on the outstanding purchase price of $138,249.17 from 31
December 1999 to 31 October 2006.
[34] The position taken by the first defendant and fourth defendant in disputing this interest claim is that this interest amount was not calculated in accordance with the sale agreement. As to this the plaintiff acknowledges that throughout the history of the sale agreement it adopted a practice of crediting any payments made on behalf of the first defendant as purchaser first to outstanding interest owing under the sale agreement and secondly against principal.
[35] Paragraph 7.2(b) of the sale agreement itself provided for the first defendant to pay interest on the outstanding balance purchase price calculated daily from 1
April 1999. As I understand the position after a variation agreement was entered into around 18 August 2000, this interest amount was then agreed to be calculated monthly on the average of the opening and closing monthly loan balances which was a slight variation to the provisions contained in para 7.2(b) of the sale agreement.
[36] Notwithstanding this, it seems undisputed that the first defendant did not pay the plaintiff the purchase price principal instalment amounts set out in para 7.2(a) of the sale agreement on a prompt basis. The plaintiff confirms it therefore calculated and charged interest on the average of the opening and closing monthly loan balances at the basic interest rate provided for in para 7.2(b) of the sale contract in accordance with the agreed arrangement and this represents the $30,249.19 claimed here.
[37] Significantly in my view, notwithstanding what was clearly a pattern of ongoing defaults under the sale agreement, interest was not calculated or charged by the plaintiff at the penalty interest rate set out in para 7.2(c) of the agreement which stated:
In the event of late payment penalty interest shall be calculated on the outstanding payment of the interest rate in 7.2(b) plus 2 percentage points.
[38] As I see it, this is a clear concession to all the defendants. It needs to be weighed against any arguments they may have advanced otherwise disputing interest payments under the sale agreement.
[39] Before me Mr Paine for the first defendant and the fourth defendant endeavoured to dispute this $30,249.19 interest charge based loosely upon his argument that as each payment was made under the sale agreement it should have gone to principal and not been applied first in settlement of outstanding interest. Mr Paine, however, advanced no authority for this contention. Certainly as I understand the position there was nothing in the sale agreement which would support the first defendant and the fourth defendant in this argument.
[40] In my view there is little in this contention made on behalf of those defendants. Applying payments made first to interest outstanding and then to principal is normal commercial practice. And interest has been charged to the defendants here at the basic interest rate under the contract rather than the penalty interest rate (two percentage points higher) to which the plaintiff appears to have been entitled.
[41] It is not disputed that purchase price payments under the sale agreement were not made in terms of the agreement. Clearly they attract interest in terms of para 7.2.
[42] In my view the first defendant and the fourth defendant have put nothing before the Court to seriously challenge in any real way the plaintiff’s $30,249.19 claim to outstanding interest on this purchase price debt for what is almost a period of seven years. And, as I understand it, the first defendant and the fourth defendant have never objected to the plaintiff’s method of calculating this interest prior to their present opposition to the summary judgment application here.
[43] For these reasons, the plaintiff in my view has satisfied the evidentiary onus upon it to show that the first defendant and the fourth defendant have no defence to this claim for interest. Summary judgment for the $30,249.19 claimed will follow.
Outstanding interest on the purchase price debt from 1 November to 31
November 2006
[44] The amount claimed here for interest by the plaintiff is $518.43.
[45] Again here, I find there is nothing of any substance advanced by the first and fourth defendants to effectively oppose this claim for interest.
[46] In particular as I have noted above these defendants, as I understand it, have never objected to the plaintiff’s method of calculating interest prior to now. Further, the interest claimed is in accordance with normal methods which were communicated to each of the parties. Significantly too, the third defendant has accepted the outstanding monthly interest as being correct.
[47] Again I am satisfied that the plaintiff has done enough here to show the defendant has no defence to the plaintiff’s quantum claim to this $518.43 interest. Summary judgment for this amount will follow.
Judgment sum for category 2 stock
[48] The amount claimed by the plaintiff for category 2 stock is $142,879.29.
[49] Before me Mr Paine for the first defendant and fourth defendant endeavoured to argue that the supply of this category 2 stock by the plaintiff was a gratuitous bailment of some sort. He endeavoured to argue that the plaintiff retained ownership of this stock and there had not been a requisition by the first defendant by way of purchase.
[50] These claims however fly in the face of evidence which is before the Court. This includes a copy of a letter from the fourth defendant Mr Boyle attached to the affidavit of Mr Henry Jacob Tavroges dated 14 November 2006 filed in support of the plaintiff’s present application. This letter dated 24 February 2006 from Mr Boyle as director of the first defendant to David Fraser of Silks Chartered Accountants Wanganui, the plaintiff’s accountants, states:
This is to advise that as per Balance Chartered Accountants the amount of secured debt owed to Barbour including interest is $441,489.43. The amount of debt owed to Barbour for stock drawn down is $142,879.29. These balances are up to 31 December 2005. (Emphasis added)
[51] The reference to “Barbour” in this letter is clearly a reference to the plaintiff which is effectively Barbour’s representative in New Zealand. The letter from Mr Boyle acknowledges a debt owed for category 2 stock drawn down of $142.879.29.
[52] Before me Mr Paine endeavoured to have this 24 February 2006 letter excluded from evidence on the basis that it did not have an attached exhibit note in Mr Tavroges affidavit. I reject this argument. The letter was clearly referred to at para [8] of Mr Tavroges’ affidavit and there and at para [7] of his affidavit he linked the category 2 stock figure of $142,879.00 specified in that letter to a similar figure reflected in the plaintiff’s financial accounts for the year ended 31 December 2005. These accounts were also attached to his affidavit.
[53] I find there is no real argument to the contrary and I find therefore that this
$142,879.00 is effectively acknowledged as due on behalf of both the first defendant and the fourth defendant. That said neither defendant has been able to demonstrate any tenable defence or opposition to the plaintiff’s quantum claim for the category 2 stock amount of $142,879.29. Summary judgment for this amount is also to follow.
Interest on the category 2 stock amount
[54] In its summary judgment claim the plaintiff seeks interest on the $142,879.29 category 2 stock amount from 17 November 2006 (the date of issue of these proceedings) to 9 May 2007 at the rate of 7.5% per annum under s 87 of the Judicature Act 1908. The plaintiff says this amounts to 175 days at $29.36 per day.
[55] Section 87(1) Judicature Act 1908 provides:
(1)In any proceedings in the High Court, the Court of Appeal or the Supreme Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate not exceeding the prescribed rate as it thinks fit on the whole or any part of the debt or
damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment…
[56] The prescribed rate in terms of s 87 is 7.5% per annum.
[57] Before me Mr Paine for the first defendant and the fourth defendant put forward two broad submissions on this interest question:
a) The first was that the fourth defendant Mr Boyle in his affidavit dated
28 February 2007 (para 7) maintained that Mr Scallion of the plaintiff said there would be no interest payable on the category 2 stock as the stock was basically obsolete.
b)In any event an award of interest under the Judicature Act 1908 is being discretionary and not mandatory, should not be made here.
[58] I have little hesitation in rejecting these arguments. First, the plaintiff strongly disputes that there was any acknowledgement by Mr Scallion or anyone else for that matter that no interest would be payable with respect to outstanding monies due for this category 2 stock. And even if Mr Scallion had done so, issues arise as to whether this would negate a right to award interest under the Judicature Act 1908. Secondly, para 5.1(b) of the sale agreement which deals with category 2 stock states that once requisitioned it is to be “…paid for by the first defendant as purchaser as
per normal trade terms on the 20th of the month following invoice”. There is nothing
before the Court to indicate what were “normal trade terms” relating to this business at the time. What is clear to me, however, is that the obligation to pay for this category 2 stock arose that s 87(1) Judicature Act 1908 interest is appropriately charged and certainly from the date these proceedings were issued if not earlier.
[59] In saying that, I am mindful of the decision in Day v Mead [1987] 2 NZLR
443 where the Court of Appeal made clear that the general purpose of the power to award interest under s 87 Judicature Act 1908 was to enable the Court properly to compensate a successful plaintiff for its loss.
[60] I am satisfied that the plaintiff here is entitled to interest under the Judicature Act 1908 upon the category 2 stock debt. This debt was to be paid by the first defendant in accordance with normal trade terms on the 20th of the month following invoice. This did not occur and the debt has clearly been outstanding for some time. Mr Boyle in his 24 February 2006 letter (noted at para [50] above) acknowledged as much.
[61] The defendants also raise no issues as to the quantum calculation of this category 2 stock interest.
[62] Summary judgment is therefore to follow for the $5,138 interest as sought by the plaintiff.
Costs and disbursements
[63] The plaintiff seeks an order for costs and disbursements totalling $12,512.83 on an indemnity basis. This is set out in the affidavit of Helen Rose Harbrow dated
7 May 2007 filed on behalf of the plaintiff where these costs and disbursements appear to be properly verified.
[64] In seeking indemnity costs against the fourth defendant the plaintiff relies upon clause 4 of the Director’s Guarantee signed by that defendant.
[65] Clause 4 of the Guarantee states:
For indemnity
The Guarantors shall indemnify the Beneficiary, and shall at all times keep the Beneficiary indemnified from and against all losses and expenses which the Beneficiary may suffer or incur as a result of any failure by the Principal Debtor to comply with the Principal Obligations.
[66] Here, there is no question that the fourth defendant has defaulted in terms of his obligations under the Guarantee and that as a result, the plaintiff as “Beneficiary” under the Guarantee has incurred the legal and other costs and disbursements outlined in the affidavit of Ms Harbrow filed in this proceeding. No issue is taken by the defendants here with the amounts claimed by way of costs or disbursements.
[67] An order by way of summary judgment is therefore to follow against the fourth defendant for this $12,583 costs and disbursements.
[68] An order for costs and disbursements for this sum is also to be made against the first defendant. In my view, as defaulting purchaser under the sale agreement, the first defendant’s opposition to the summary judgment application is without merit and an award of indemnity costs is appropriate here.
Conclusion
[69] For the reasons I have outlined above it will be apparent that the plaintiff’s application for summary judgment here succeeds in its entirety.
[70] An order is now made granting summary judgment to the plaintiff WK Limited against the first defendant W.K. Backhouse Limited and against the fourth defendant Noel Patrick Boyle in terms of the plaintiff’s statement of claim filed in this proceeding for the total sum of $191,297.74 calculated as follows:
a) Outstanding monthly interest in relation to the purchase price debt of
$138,249.17 from 31 December 1999 to 31 October 2006: the sum of
$30,249.19.
b) Outstanding interest in relation to the purchase price debt from 1
November to 31 November 2006 (after which the purchase price debt was paid and interest ceased to accrue): the sum of $518.43.
c) For category 2 stock: the sum of $142,879.29.
d) Interest on the category 2 stock judgment sum from 17 November
2006 to 9 May 2007 at 7.5% per annum under s 87 Judicature Act
1908 (175 days at $29.36 per day): the sum of $5,138.00.
e) Costs and disbursements calculated on an indemnity basis: the sum of
$12,512.83.
Solicitors:
Minter Ellison, Wellington for Plaintiff
Moore Law, Wanganui for Defendants
‘Associate Judge D.I. Gendall’
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