Parnell Property Investments Ltd v Bank of New Zealand Hc Ak

• Jurisdiction: New Zealand
• Judge: BELL
• Judgment Date: 25 January 2012
• Neutral Citation: [2012] NZHC 12
• Docket Number: CIV-2010-404-7186
• Court: High Court
• Date: 25 January 2012

BETWEEN

Parnell Property Investments Limited

First Plaintiff

and

St Stephens Investments Limited (in Liquidation) (discontinued)

Second Plaintiff

and

Stephen Osborne

Third Plaintiff

and

Bank of New Zealand

Defendant

BETWEEN

Bank of New Zealand

Plaintiff

and

Parnell Property Investments Limited (In Liquidation)

First Defendant

and

St Stephens Investments Limited (In Liquidation)

Second Defendant

and

Fifer Residential Limited

Third Defendant

and

Stephen Osborne and Julie Margaret Alexander

Fourth Defendants

and

Julie Margaret Alexander

Fifth Defendant

[2012] NZHC 12

CIV-2010-404-7186

CIV-2011-404-3643

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Summary judgment application by the third plaintiff claiming defendant induced a breach of contract and caused interference with trade by unlawful means — Summary judgment application by defendant seeking enforcement of guarantees and strike out of plaintiffs' claims — loans given to companies on condition that facility be used to reduce overdrafts of to other companies — defendant transferred money to clear overdrafts and plaintiffs had insufficient funds to settle on development purchase by one of their associated companies — whether transfers of funds by bank to reduce indebtedness of other companies were unauthorised — whether transfers affected plaintiffs' guarantees — whether defendant had induced breach of contract or caused loss by wrongful interference by making transfers — whether director of plaintiffs could claim when not himself a party to the sale and purchase contract.

Appearances:

A M Swan for Fifer Residential Ltd, Stephen Osborn and Julie Margaret Alexander

Z Kennedy and N Chamberlain for Bank of New Zealand

JUDGMENT OF ASSOCIATE JUDGE BELL

Introduction

1 These two cases have been heard together as they relate to similar facts. In CIV-2011-404-3643 the Bank of New Zealand is the plaintiff and seeks judgment against five defendants. The proceeding CIV-2010-404-7186 relates to similar facts but in this the bank is the defendant whilst one of the named defendants in the first proceeding is the plaintiff. Taken together there are three matters for decision:

• (a) In CIV-2011-404-3643 the Bank of New Zealand seeks:

  • (i) summary judgment against Stephen Osborn and Julie Alexander (as trustees of the Alexander Family Trust) and Julie Alexander personally, for $8,405,767.50 plus interest under a guarantee dated 7 December 2007; and

  • (ii) summary judgment for $187,023.68 plus interest against Mrs Alexander under another guarantee given in 2007.

• (b) Again in CIV-2011-404-3643, the Bank of New Zealand seeks summary judgment for vacant possession of the property at 43, 45 and 47 St Stephens Avenue, Parnell, Auckland.

• (c) In CIV-2010-404-7186 the Bank of New Zealand seeks summary judgment against Mr Osborn, or an order striking out Mr Osborn's claim.

2 By consent evidence from both proceedings has been used for all applications.

The Bank of New Zealand's claims

3 In proceeding CIV-2011-404-3643 the bank has four causes of action:

• (a) Against Parnell Property Investments Ltd (Parnell) and St Stephens Property Investments Ltd (St Stephens) for $10,144,752.65 plus interest as the sums payable under a number of banking facilities and for vacant possession of the property at St Stephens Avenue under powers in a mortgage. It also seeks the last order against Fifer Residential Ltd;

• (b) Against Julie Alexander judgment on a guarantee of the obligations of Parnell and St Stephens under a facility called an asset finance agreement;

• (c) Against Stephen Osborn and Julie Alexander (as trustees of the Alexander Family Trust) and Julie Alexander personally, for $6,600,000 plus interest under a guarantee of the indebtedness of Parnell and St Stephens; and

• (d) Against Fifer Residential Ltd (Fifer) and other occupants an order for vacant possession of the St Stephens Avenue property.

4 In CIV-2011-404-3643 the bank has already obtained summary judgment against Parnell and St Stephens for $9,063,788,11. Those companies are now in liquidation. The liquidators have advised that they do not oppose the orders for vacant possession.

5 In CIV-2011-404-3643 Mr Osborn is sued on a guarantee given by him as trustee of the Alexander Family Trust. It is common ground that his liability under the guarantee is limited to the assets of the trust. He does not face personal liability for any judgment against him under the guarantee.

6 On 16 December 2011 the bank advised that it no longer wished to pursue Mrs Alexander on her personal guarantee of the asset finance facility. This was not a release from the guarantee of 7 December 2007 given as trustee of the Alexander Family Trust. That claim against her remains alive.

Mr Osborn's claims

7 In CIV-2010-404-7186 the statement of claim by Stephen Osborn has two causes of action against the bank:

• (a) A claim for inducing breach of contract claiming $1,074,100 as wasted expenses, $7,300,000 for loss of profit, $100,000 for stress and emotional harm and $500,000 for exemplary damages; and

• (b) A claim for interference with trade by unlawful means seeking the same relief.

8 In CIV-2010-404-7186 Parnell, St Stephens and Mr Osborn initially sued the bank for breach of fiduciary duty and applied for an interim injunction to stop the bank selling the St Stephens property under the power of sale in a mortgage. Woolford J dismissed that application on 28 February 2011. 1 The liquidators no longer wish to continue the companies' claims in CIV-2010-404-7186. Only Mr Osborn's claims against the bank in his statement of claim remain alive. A third amended statement of claim was tendered for the hearing.

9 The main questions are:

• (a) Were four transfers from an account of Parnell Property Investments Ltd and St Stephens Property Investments Ltd on 30 April and 1 May 2007 amounting to $1,606,000 unauthorised and, if so, what are the effects on the bank's claim?

• (b) What is the amount of the bank's claim under the guarantee of 7 December 2007?

• (c) Has the bank consented to a lease of the St Stephens property to Fifer Residential Ltd?

• (d) Does Mr Osborn have tenable causes of action in his claim against the bank?

Factual Background

10 The Bank of New Zealand provided a number of loan facilities to entities and persons associated with a Mr Paul Graeme Alexander. Mr Alexander is not himself a party to this proceeding and was not a party to any of the loan facilities. At the relevant times he was an undischarged bankrupt for the second time. Bankruptcy is intended to enforce retirement from commercial activity for a time: under s 149 of the Insolvency Act 2006 2 a bankrupt may not without the consent of the Official Assignee enter into, carry on or take part in the management or control of any business, be employed by a relative or be employed by a company, trust, trustee or incorporated society owned, managed or controlled by a relative. Some bankrupts find these restrictions irksome and still involve themselves in commercial activity. They may try to do so through other persons and entities. When that happens, the outcomes are not always happy. This is one such case. Mr Alexander says that he acted as a property consultant for the companies listed below. He was an agent for the defendants and brought about transactions between the bank and the other parties. The bank was aware of his status. I am not required to decide whether Mr Alexander breached the ban under s 62 of the Insolvency Act 1967. 3

11 The persons and entities associated with Mr Alexander are:

• (a) Julie Margaret Alexander: The wife of Mr Paul Alexander. She is a trustee of the Alexander Family Trust with Mr Stephen Osborn.

• (b) Proprius Holdings Ltd: Its business was property investment. Its director is Mrs Alexander. Its sole shareholder is Musback Corporation Ltd. Proprius has been put into receivership and liquidation and is now struck off.

• (c) Musback Corporation Ltd: Mrs Alexander is a director and shareholder.

• (d) Fifer Residential Ltd: Its business was property investment. Julie Alexander is a director. Mrs Alexander and Mr Osborn are shareholders.

• (e) Stephen Osborn: An associate of the Alexanders.

• (f) St Stephens Investments Ltd (in liquidation): The director is Mr Osborn and the shareholder is Aries Holdings Ltd.

• (g) Parnell Property Investments Ltd (in liquidation): The director is Mr Osborn and the shareholder is Aries Holdings Ltd.

• (h) Aries Holdings Ltd (in liquidation): Mr Osborn is a director and shareholder.

• (i) Sarah's Cove Investments Ltd: The director is Mr Osborn. The shareholder is Aries Holdings Ltd. The company has been struck off.

• (j) Original Car Warehouse (2003) Ltd (in liquidation): Bruce Mansell, an associate of Paul Alexander, is a director and shareholder. Mr Mansell holds part of his shareholding on a trust for Paul Alexander. Original Car Warehouse (2003) Ltd is in liquidation.

• (k) Marine Ambulance Services (No.2) Ltd: Mrs Alexander is director and shareholder.

• (l) Great South Property Holdings Ltd: Mrs Alexander is director. The shareholders are Mrs Alexander and B M Trustee Company Ltd. The company has been struck off. It was previously in liquidation.

• (m) Compark Properties Ltd: Mrs Alexander is director and shareholder.

12 This case primarily concerns the bank's loans and facilities to Parnell and St Stephens and guarantees of those loans and facilities. At the same time the bank also entered into other arrangements with other entities associated with Mr Alexander. Those arrangements were often recorded in the bank's letters of offer, which also set out arrangements in question in this case. For this decision it is not necessary to go into the details of the facilities for the...