Ballindine Ltd v Roger Hamilton Gower
| Jurisdiction | New Zealand |
| Judge | J P Doogue |
| Judgment Date | 23 July 2013 |
| Neutral Citation | [2013] NZHC 1805 |
| Docket Number | CIV-2013-404-1157 |
| Court | High Court |
| Date | 23 July 2013 |
[2013] NZHC 1805
CIV-2013-404-1157
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
Application for summary judgment that defendant pay AU$339,796 allegedly owing pursuant to a guarantee — third party (“J”) was co-guarantor — at time guarantee was signed, J was a partner in a law firm and had acted for defendant as his solicitor in the past — common ground that J witnessed defendant's signature and had not explained the effect of the guarantee to defendant or advised him to obtain independent legal advice — whether guarantee was entered into under undue influence — whether it was oppressive for plaintiff to seek to enforce the guarantee due to delay such that the credit contract should be re-opened pursuant to s120(b) Credit Contracts and Consumer Finance Act 2003 (reopening of credit contracts, consumer leases, and buy-back transactions).
Mr A Sorrell and Ms A Borchardt for Plaintiff
Mr M Pascariu for Defendant
JUDGMENT OF ASSOCIATE JUDGE J P Doogue
The plaintiff, Ballindine Limited, seeks summary judgment to compel the defendant, Mr Gower, to pay AU$339,796.21 allegedly owing pursuant to a guarantee that he signed. Ballindine also seeks payment of legal costs incurred in Australia and New Zealand, costs of this action, and interest. Mr Gower opposes summary judgment as he argues the guarantee was executed whilst he was under undue influence and failure to make demand on him within a reasonable time means it is oppressive for Ballindine to enforce the guarantee.
The undisputed facts are that the defendant provided the guarantee on 23 August 2007 to secure a loan from the plaintiff to Munro Corporation Pty Limited (“Munro”) for AU$100,000. The interest rate was 20% per annum and the default interest rate was 30% per annum. The guarantee was signed by the defendant and co-guarantors, Mr Joyce and Mr Hirst. The guarantors were jointly and severally liable. Mr Joyce and Mr Hirst were the directors of Munro. Mr Gower was a shareholder. The loan agreement had been signed by Mr Hirst in Sydney which allegedly resulted in an urgent situation where Mr Gower signed the guarantee in his car on that same day.
On 23 May 2008, Munro defaulted on repayment of the loan agreement. The balance of the loan and all interest became immediately due. On 19 October 2009, Ballindine obtained a default judgment against Mr Hirst in Australia. Mr Hirst entered into a deed of arrangement with his creditors and Ballindine received AU$4,890.97 in repayment of all sums owing under the loan agreement.
On 12 August 2011, Mr Gower received a demand from Ballindine via email for the amount then owing, which had accrued compound interest. On 31 August 2011, demand was made on Mr Gower in accordance with the terms of the guarantee. Mr Gower denied liability and applied for leave to issue a third party notice against Mr Joyce. The application for leave is unopposed.
At the time when the guarantee was signed, Mr Joyce was a partner in Jones Young Solicitors and had acted for Mr Gower as his solicitor in the past. Mr Gower submits that there were several facets to Mr Joyce's involvement in the signing of the guarantee and the surrounding circumstances. He alleges that Mr Joyce was acting as the solicitor for Ballindine, that he was Mr Gower's solicitor, a director of Munro, an investor in Munro, and a co-guarantor.
It is common ground that Mr Joyce witnessed Mr Gower's signature and had not explained the effect of the guarantee to Mr Gower or advised him to obtain independent legal advice. Ballindine submits that Mr Joyce was not acting for Ballindine and does not know of Mr Joyce acting as solicitor for Mr Gower at the relevant time.
Mr Gower argues that he has two defences to the claim for summary judgment. First, he claims that the guarantee is not enforceable as it was entered into under undue influence. Secondly, he claims that it is oppressive for Ballindine to seek to enforce the guarantee due to delay, and that the solicitor-client costs sought are oppressive.
Ballindine applies for summary judgment under r 12.2 High Court Rules:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to [a cause of action in the statement of claim or to a particular part of any such cause of action].
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.
The principles are set out in the judgment of the Court of Appeal in Krukziener v Hanover Finance Ltd: 1
[26] The principles are well settled. 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). 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). 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)[27] Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial
The defence which Mr Gower puts forward does not arise from his direct dealings with the plaintiff. It is not suggested, for example, that an employee of the plaintiff exercised undue influence upon him. Rather, the route which his claim takes is less direct. He says that Mr Joyce was his solicitor in regard to the transaction and that as such he brought undue influence to bear upon him. Mr Gower argues that the rights that the plaintiff as the lender had against him were compromised by the exercise of undue influence on the part of Mr Joyce. This is because Mr Joyce was also acting as agent for the plaintiff, so that such knowledge of any undue influence exerted by him on Mr Gower would be imputed to the plaintiff as principal, or Ballindine was put on inquiry as to the risk of undue influence and failed to insulate itself from the consequences of undue influence.
To have an arguable defence to Ballindine's claim for summary judgment due to undue influence, Mr Gower must establish that it is arguable:
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(a) that he was subject to undue influence; which involves:
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(i) a relationship of trust and confidence, whether presumed or proven; and
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(ii) a transaction calling for explanation.
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(b) that any due influence can be imputed to Ballindine by reason of Mr Joyce being its agent, or the circumstances of the undue influence were known to Ballindine such as to put it on inquiry of the risk of undue influence;
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(c) that Ballindine did not act to insulate itself from the consequences of that influence.
The approach to undue influence set out in Law of Contract in New Zealand 2 has been accepted as an accurate statement of the law in New Zealand. 3 This is that in certain special cases where there is a fiduciary relationship between parties, trust and confidence is irrebutably presumed. However, there is no presumption that any influence arising from that relationship was undue. Law of Contract in New Zealand sets out:
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(ii) presumed undue influence is … the same as actual undue influence. The difference lies in how undue influence is proved. … Sometimes undue influence is proved directly, by evidence of the actual exertion of wrongful influence. But sometimes a claimant proves circumstances which justify the drawing of an evidential inference that undue influence has occurred.
(iii) An evidential presumption of undue influence arises where there is a relationship involving elements such as trust, confidence, reliance and dependency by one party towards the other, and the circumstances of the transaction are such as to call for an explanation. The relationship may be recognised by law, without proof of actual trust and confidence, or may simply be proved on the facts of the case. Factors which bear upon any need for an explanation include the size of the transaction and disadvantage to the weaker party. An element of disadvantage is relevant but is not a necessary condition before a presumption can arise.
(iv) In every case the question is whether undue influence has been established on the facts that have been proved. The legal burden of proof is on the plaintiff. An evidential presumption can assist in reaching the conclusion that there was undue influence in fact. It can be rebutted by evidence showing that the weaker party was free from any improper influence.
Mr Gower asserts that he has a defence available to him under the doctrine of undue influence. The argument is that a...
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