Lawrence v Bank of New Zealand [2001] NZCA 375; (2001) 16 PRNZ 207 (6 December 2001)

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Lawrence v Bank of New Zealand [2001] NZCA 375 (6 December 2001); (2001) 16 PRNZ 207

Last Updated: 10 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 222/01

	BETWEEN	GARRY RAYMOND LAWRENCE
		Applicant

	AND	BANK OF NEW ZEALAND
		Respondent

Coram:	Richardson P Blanchard J Tipping J
Judgment (on the papers):	6 December 2001

JUDGMENT OF THE COURT

[1] The applicant, Mr Lawrence, sought leave to appeal out of time to this Court under r 5(1) of the Court of Appeal (Civil) Rules 1997.
[2] Metro City Apartments Ltd (“MCA”) was the owner and developer of a block of apartments in Auckland. The respondent, the Bank of New Zealand (“the BNZ”), entered into a facility agreement with MCA on 26 November 1998 pursuant to which the BNZ agreed to provide funds of up to $10 million. Mr Lawrence, the present applicant, was a director of MCA and executed a personal guarantee in respect of MCA’s obligations to the BNZ. Sales of MCA’s apartments were unexpectedly slow, and the BNZ appointed receivers for MCA on 5 July 2000. On 31 August 2000 the BNZ commenced proceedings against Mr Lawrence and Mr Lofts, another guarantor and director of MCA. Master Gambrill entered summary judgment for $1,035,418.97, together with interest, against Mr Lawrence on 20 February 2001. Concluding that he had no arguable defence to the BNZ’s claim, the Master rejected various arguments advanced by Mr Lawrence, including allegations to the effect that the BNZ had breached obligations owed by it to Mr Lawrence, that MCA’s two other directors had acted fraudulently and that the receivers had acted improperly.
[3] On 5 April 2001 Mr Lawrence filed a notice of appeal against the Master’s judgment. On 23 May he applied to the High Court under r 9 of the 1997 Rules for a stay of execution of the Master’s judgment pending the determination of his appeal to this Court. At the hearing of the application under r 9 before Randerson J, Mr Lawrence, appearing in person and having discovered that r 11 of the 1997 Rules deemed his appeal against the Master’s decision to have been abandoned because of his failure to provide security for costs, applied orally under r 5 for special leave to appeal to this Court against Master Gambrill’s decision. The Judge dismissed both of the applications before him in his decision of 30 July 2001. On 29 August 2001, the time under r 5 for appealing against the judgment of Randerson J having expired, Mr Lawrence filed in this Court an application for leave to appeal out of time against Randerson J’s judgment. Following correspondence with the Court Office, Mr Lawrence withdrew the notice of 29 August and on 7 September 2001 filed a notice of application for leave to appeal and leave to appeal out of time. In it he stated that:

... the Applicant will move the Court of Appeal for leave to appeal out of time and leave to appeal the decision of the learned Judge dated 30 July 2001 ...

[4] Mr Lawrence asked us to deal with his application on the papers without the parties appearing at an oral hearing. Mr Kennedy for the BNZ informed the Court that the BNZ would consent to this course of action if the Court felt that it had before it adequate material to determine the application. We advised the BNZ that we felt we had and accordingly advised the parties that we would deal with the matter on the papers.
[5] The BNZ submitted that this Court could not grant Mr Lawrence leave to appeal against Randerson J’s refusal to order a stay of execution pending the determination of an appeal against the Master’s judgment when there was no extant appeal against the Master’s judgment nor even a valid application for special leave to appeal against the Master’s judgment out of time. However, in the documents filed on 29 August and 7 September Mr Lawrence stated that he sought to adduce at the hearing of his application to this Court seven bound volumes of what he described as fresh evidence. He submitted that this evidence establishes that he had five defences against the BNZ’s summary judgment application which he was unable to advance before the Master and the Judge. It was therefore clear to the BNZ that Mr Lawrence intended to challenge the Master’s decision, and indeed the BNZ’s submissions addressed in detail the question of whether this Court should grant Mr Lawrence special leave to appeal the Master’s decision out of time. In these circumstances we consider it appropriate to proceed on the basis that there is before the Court an application for leave to appeal out of time against the Master’s judgment as well as an application for a stay of execution of the Master’s judgment.
[6] It is not clear whether Mr Lawrence intended to appeal against Randerson J’s refusal to grant a stay of execution under r 9(1). While it is not necessary to decide the point, we incline to the view that it is not possible to appeal against refusal of a stay: see Sim’s Court Practice, para CAR9.5. We proceed on the basis that Mr Lawrence has filed before this Court an original application for a stay.
[7] Mr Lawrence, in submissions prepared for him by Resolve Independent Financial Consultants Ltd (“Resolve”), submitted that the new evidence establishes that the following defences were open to him:

• [a] Failure on the part of the BNZ to disclose to Mr Lawrence the true nature and extent of his liability at the time the guarantee was executed;
• [b] Oppressive conduct in the light of the BNZ’s conduct towards Mr Lawrence under s 9 of the Credit Contracts Act 1981, justifying the re-opening of the contract under s 10;
• [c] Negligence on the part of the BNZ in failing to follow established account operating procedures. The allegation appears to be that the BNZ was negligent in failing to prevent Messrs Lofts and Bradbury from defrauding or stealing from MCA and thereby causing losses in respect of which the BNZ proceeded against Mr Lawrence under the guarantee;
• [d] Negligence on the part of the BNZ in failing to act on a verbal countermand given by Mr Lawrence;
• [e] Failure by the BNZ to obey MCA’s mandate.

[8] It appears that, if granted special leave, Mr Lawrence may intend to raise defences advanced before the Master and the Judge but in relation to which he seeks to adduce no fresh evidence.
[9] The BNZ submitted that leave to appeal against the Master’s judgment should be declined because the evidence which Mr Lawrence sought to admit is neither fresh, cogent nor credible and because it is largely inadmissible hearsay evidence. It further submitted that leave should be declined because Mr Lawrence’s appeal would be highly unlikely to succeed if leave were granted, because the intended appeal raises no questions of public importance and because the applicant’s inability to raise security for costs is not a justification for granting special leave to appeal.
[10] The volume of the evidence which Mr Lawrence sought to adduce in support of his application and intended appeal is such that we shall not attempt to summarise it in its entirety in this judgment. Indeed, much of the material contained in Resolve’s report cannot really be described as evidence and is more aptly described as background information. However, we have reviewed thoroughly all the material filed by Mr Lawrence. Having reviewed it, we feel compelled by well established principles to decline his application for special leave. It is unnecessary for us to express any conclusion as to the admissibility in terms of the rules of evidence of the evidence which Mr Lawrence sought to adduce.
[11] When considering an application for special leave to appeal under r 5 of the 1997 Rules, this Court has a wide discretion to do justice in an individual case: Thompson v Turbott [1963] NZLR 71 at p 80. However, the Court will attach weight to the merits of an intended appeal: Hetherington Ltd v Carpenter (1995) 9 PRNZ 1. Leave will not be granted where an intended appeal is frivolous, vexatious or entirely lacking in merit. It is apparent that Mr Lawrence feels very deeply about this case. But we have reached the view that, even if the additional material filed in this Court were admitted, there would simply be insufficient evidence for Mr Lawrence to be able to establish that he has an arguable defence.
[12] Mr Lawrence’s allegations of fraud and theft against Messrs Lofts and Bradbury are serious. A court cannot accept such allegations without compelling evidence. The Master concluded that Mr Lawrence had provided “absolutely no substantiated evidence of the allegations of theft and fraud” (para 9 of the judgment). Mr Lawrence did not challenge that finding in his application, and so before us he must be taken to have been relying entirely on the allegedly fresh evidence to establish fraud or theft. The strongest material he presented was the following:

• [a] A heads of agreement providing for the sale of an apartment in MCA’s development to a Mr Whittle. The document records that $125,000 was deducted from the purchase price payable by Mr Whittle for the apartment on account of the sale of what is described as a “motor vessel” by Mr Lofts to Mr Whittle;
• [b] A letter from Bell Gully stating the firm would not act further for MCA on account of the heads of agreement and other incidents which caused it embarrassment;
• [c] A letter from a Mr Beecroft, a chartered accountant, to Mr Lawrence, stating that “I have held the view ... that Messrs Lofts & Bradbury fraudulently converted funds from the MCAL bank account”.
• [d] Records of transfers of money, which Mr Lawrence claims were not authorised by him;
• [e] A transcript of a message left for a Mr Bowers by a Mr Condliffe, in which the latter stated that a Mr Berry had told him that “the trust account probably off the record is still being bled”.

[13] That material does not suffice to establish a likelihood of fraud. Furthermore, given that this evidence represents the culmination of efforts on the part of Mr Lawrence and Resolve spanning several months, it appears unlikely that further evidence could be obtained.
[14] But even if fraud and theft could be established, it would be necessary for Mr Lawrence to establish that the BNZ was, or at least should have been, aware that it was occurring and that the bank’s failure to take action resulted in the losses for which Mr Lawrence is being asked to account. The Master found that the evidence before her of actual or constructive knowledge on the BNZ’s part was inadequate. The new evidence on which Mr Lawrence based his application to this Court added very little to what was before the Master, and inconsistent statements made by Mr Lawrence to the BNZ weaken what little support for an inference of actual or constructive knowledge there is. While the BNZ admits that in telephone conversations Mr Lawrence complained about Messrs Lofts and Bradbury, its records do not indicate that Mr Lawrence ever referred to fraud and theft. Furthermore, on several occasions after having complained to the BNZ, Mr Lawrence assured the BNZ that Messrs Lofts and Bradbury were doing “an excellent job” and assisting MCA to recover financially.
[15] We are satisfied that the other defences on the basis of which Mr Lawrence sought leave to appeal—non-disclosure, oppressive conduct, Mr Lawrence’s countermand and failure to obey MCA’s mandate—similarly have no prospect of success.
[16] Mr Lawrence sought to argue that the BNZ breached its duty of disclosure by failing to inform him that it knew that MCA’s cash flow would be managed by Metro City Management Ltd (“MCM”). It is well settled that guarantees are not contracts of the utmost good faith requiring full disclosure of all material facts by both parties: Seaton v Heath [1899] 1 QB 782; O’Donovan and Phillips, The Modern Contract of Guarantee (3rd ed, 1996) at p 122. Only unusual features of commercial arrangements different from what a guarantor would naturally expect must be disclosed: Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447; Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674, 690. In the light of the fact that Mr Lawrence was himself a director of MCA, he cannot claim that the details of MCA’s cash flow arrangements were matters with which the BNZ was not entitled to assume his familiarity.
[17] There was nothing in the material which Mr Lawrence sought to adduce to support any of the other defences on which he relied in support of his application (oppressive conduct under the Credit Contracts Act 1981, failure by the BNZ to respond to Mr Lawrence’s countermand and failure to obey MCA’s mandate).
[18] Finally, we record that even if there were now some evidence to support Mr Lawrence’s allegations, there would remain the difficulty that the allegedly fresh evidence on which the likelihood of the success of his intended appeal would be dependent is not fresh and is largely inadmissible hearsay. It is well settled that this Court will not admit evidence on appeal under r 24 of the 1997 Rules unless the evidence could not with reasonable diligence have been obtained for use in the court below, is cogent and is credible: Airwork (NZ) Ltd v Vertical Flight Management Ltd [1999] 1 NZLR 641; Rae v International Insurance Brokers (Nelson Malborough) Ltd [1998] 3 NZLR 190. In this case we are satisfied the material which Mr Lawrence sought to adduce could, had reasonable diligence been exercised, have been put before the Master. Litigation would never come to an end if the parties to cases were permitted to adduce further evidence in less than exceptional cases. Particular weight must be accorded to the need for finality in litigation in this context in summary judgment proceedings, whose purpose it is to permit unmeritorious claims and defences to be brought justly and efficiently to a swift end.
[19] For the reasons set out above, special leave to appeal is refused. The application for a stay of execution is accordingly dismissed. If any questions of costs arise, the parties may file memoranda.

Solicitors
Buddle Findlay, Auckland, for respondent