|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Court of Appeal of New Zealand |
![[AustLII]](/images/tiny-austlii.gif)
Court of Appeal of New ZealandLast Updated: 15 December 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA312/2009[2009] NZCA 574
BETWEEN TRUSTEES EXECUTORS LIMITED
Appellant
AND JOSEPH LAWRENCE WOOD TURNBULL
First Respondent
AND JOAN TURNBULL
Second Respondent
Hearing: 21 October 2009
Court: Arnold, Randerson and Allan JJ
Counsel: G J Toebes and R J Gordon for
Appellant
N Cervin for First and Second
Respondent
Judgment: 8 December 2009 at 3 pm
|
JUDGMENT OF THE COURT
|
REASONS OF THE COURT
(Given by Arnold
J)
[1] The appellant, Trustees Executors Limited (TEL), sued the first and second respondents, Mr and Mrs Turnbull, for sums outstanding under a loan agreement, which was secured by a mortgage on a commercial property, and sought summary judgment. Associate Judge Sargisson declined to grant summary judgment, on the ground that the Turnbulls had a genuinely arguable defence that it would be unconscionable to enforce the loan agreement: HC AK CIV 2008-404-1511 1 May 2009. TEL now appeals against that refusal.
Factual background
[2] On 18 October 2006 Mr and Mrs Turnbull (then aged 70 and 64 years respectively) signed a loan application addressed to TEL seeking a loan of $4 million for five years on an interest only basis. The application:
(a) Indicated that Mr Turnbull was self-employed and had been engaged in property investment and rental accommodation for seven years, and that Mrs Turnbull was an officer manager who had been working for Work and Income New Zealand for three years.
(b) Stated that the purpose of the loan was to purchase a residential investment property at 74 – 76 Upper Queen Street, Auckland (the Queen Street property).
(c) Identified the purchase price of the Queen Street property as being $5.5 million (against a registered valuation of $5.45 million), and said that the Turnbulls were contributing $1.2 million towards the price and that “other funds” of $300,000 were available, leaving a balance of $4 million to be borrowed.
[3] The details of the Turnbulls’ income and expenditure stated in the loan application included the following:
(a) The gross annual incomes of Mr and Mrs Turnbull were $30,000 and $38,000 respectively.
(b) The annual income from the Queen Street property would be $477,360.
(c) The Turnbulls owned two properties (in addition to the Queen Street property), namely a property on West Coast Road, Glen Eden, worth $1.2 million and one on Cochrane Avenue, Arkles Bay, worth $755,000, vehicles, tools and computers worth $88,000, electronic goods, appliances and personal effects worth $130,000 and deposits of $12,500. Accordingly, the application indicated that the Turnbulls had total assets (including the Queen Street property) of just under $8 million and total liabilities (including the proposed loan) of just under $4 million.
The application identified the Turnbulls’ solicitor as being Ms Hart of Parnell Law.
[4] The application was submitted to TEL by Mr Mayer, who controlled a company called North Star Holdings Limited, which was the vendor of the Queen Street property. Mr Mayer was a close business associate of the Turnbulls’ son, Simon Turnbull, an architect/developer. Both Mr Mayer and Simon Turnbull were valued clients of TEL. Simon Turnbull’s wife, Monica de Magalhaes, was also involved in their business activities.
[5] In addition to the loan application, TEL was provided with copies of:
(a) A current valuation of the Queen Street property, which was addressed to TEL and stated that it was provided “solely for the use of/and is limited to [TEL]/Turnbull Trust, as our client”. The valuation described the building as a former two storey office building and rear warehouse which had been converted into 10 self-contained residential flats, each having five bedrooms, some ground floor office space and a rear studio with living accommodation.
(b) The sale and purchase agreement for the Queen Street property between North Star as vendor and Mr Turnbull as purchaser. The agreement was undated and conditional on the purchaser conducting due diligence. It provided that the price was $5.5 million, that a $300,000 deposit was to be paid and that the balance would be paid as follows:
16. The balance of the purchase price is to be satisfied by the purchaser transferring to the vendor all the property at 365 West Coast Rd Gleneden [sic] Auckland for the sum of $1,200,000.00 as part payment, as to the balance of purchase price the sum of $4,000,000 to be paid in cash in one lump sum on settlement date.
[6] Following its internal analysis TEL decided to approve the application, apparently viewing it as an “opportunity to extend borrowings to high net worth clients.” By letter dated 20 October 2006, addressed to the Turnbulls but care of Mr Mayer at MDM Holdings Ltd (another of Mr Mayer’s companies), TEL approved the application in principle. The approval was subject to the completion of certain steps, including the receipt of copies of the tenancy agreements confirming rentals of not less than $477,360 per annum. The loan was to be secured by a first mortgage over the Queen Street property.
[7] At the end of TEL’s letter of offer there was a section to be completed by the borrowers. They were required to make various declarations and to signify their acceptance of the offer by signing the letter. In this instance, Mr Turnbull signed the letter but Mrs Turnbull did not. The section noted that the loan was to be used for property investment, that the funds were required on 25 October 2006 and that Alexis Hart of Parnell Law was acting as the borrowers’ solicitor. Mr Mayer returned the completed letter to TEL on 20 October.
[8] Having carried out credit checks on Mr and Mrs Turnbull, which turned up nothing untoward, TEL wrote to Ms Hart on 20 October 2006, confirming that the Turnbulls’ application had been approved and asking her to attend to completion and execution of the security documents; to undertake disclosure under the Credit Contracts and Consumer Finance Act 2003 (CCCFA); to register the documents; and to account to TEL. The letter noted that the funds would be available for disbursement on receipt of various specified items, including “certified photographic identification”. In the meantime Mr Mayer provided TEL with some additional information, including copies of the Turnbulls’ recent bank statements and the tenancy agreements covering the Queen Street property.
[9] On 26 October 2006 the Turnbulls signed the loan agreement. They initialled sections in the agreement which clearly identified the amount of the loan and the first and subsequent monthly interest payments. They also initialled disclosure statements under the CCCFA, and executed a first mortgage over the Queen Street property in favour of TEL with a priority of slightly less than $4.7 million.
[10] The PO Box number given as the borrowers’ address in the loan agreement was a box number operated by their son, Simon. Further, on TEL’s copy of the loan application, someone has noted alongside the Turnbulls’ contact details Simon Turnbull’s name and mobile telephone number. Mrs Turnbull said in her affidavit that her son had told her that he and his wife Monica were buying the Queen Street property and wanted his parents to guarantee some money he was borrowing. Mrs Turnbull said Simon Turnbull brought the loan agreement and the mortgage to her workplace, where she signed them with a colleague as witness. Simon Turnbull took the documents away with him and did not leave her with copies. Mrs Turnbull thought her husband had signed the documents after she had.
[11] In his evidence, Mr Turnbull said that he had visited his son’s office to sign the papers. He said his son took him to the office of a “lady lawyer” (Ms Hart), which was in the same building as his son’s office, and he signed the documents there. He said he spent about 10 minutes with Ms Hart. He was unclear as to precisely what happened, but thought that Ms Hart asked him whether he knew what he was signing. He said that she certainly did not discuss the transactions or his personal circumstances with him in any detail. He signed the documents, with Ms Hart as witness.
[12] The loan was drawn down and the purchase of the Queen Street property was settled. In their settlement statement, the solicitors for North Star noted the payment of the $300,000 deposit and recorded “advice from client of satisfaction” in relation to $1.4 million of the purchase price (presumably this related to the property at West Coast Road Gleneden, although the amount differs from the $1.2 million set out in cl 16 of the sale and purchase agreement). Apart from this brief notation in the settlement statement, there was no evidence before the Associate Judge as to whether any property or other asset was transferred to the vendor. This was a substantial element in the transaction from the vendor’s point of view and suggests that the relationship between Simon Turnbull and Mr Mayer was not at arms length.
[13] Ms Hart attended to the execution and registration of the transfer and mortgage and other necessary documents. She reported to TEL, and provided her solicitor’s certificate and undertakings (which certified among other things that the documents had been properly signed) and copies of the Turnbulls’ driving licences which she had certified (despite, apparently, having never met Mrs Turnbull).
[14] Monthly interest payments were due on the loan from 15 November 2006. They were paid without incident until 15 February 2007, when there was a default. It was remedied after TEL sent a facsimile to Simon Turnbull. Monthly payments continued until 15 October 2007, when payments ceased. On 6 December 2007 TEL’s solicitors wrote to Mr and Mrs Turnbull at their home address setting out the details of the default and indicating what was required to rectify the position. That letter recorded that TEL had been in discussion with Malcolm Mayer and Monica de Magalhaes about the income derived from the Queen Street property and the servicing of the loan. TEL then served notices under the Property Law Act 1952 on Mr and Mrs Turnbull for the arrears. Their evidence was that they simply passed these on to their son and his wife.
[15] On 14 March 2008 TEL issued proceedings seeking to recover the $4 million principal and the outstanding interest, and sought summary judgment. The Turnbulls opposed that application, claiming that the loan agreement should not be enforced on the ground of unconscionability. In practical terms, however, they accepted that TEL could exercise its powers of mortgagee sale in respect of the Queen Street property, but argued that it should not be entitled to pursue them under their personal covenants for any shortfall.
High Court decision
[16] Associate Judge Sargisson said at [50] that the questions for her were whether it was arguable that:
(a) The Turnbulls were under a qualifying disability;
(b) TEL had actual or constructive knowledge of any such disability and took advantage of it; and
(c) The transaction was not fair and reasonable from the perspective of the Turnbulls, given any disability that they were under.
[17] The Associate Judge concluded that it was arguable that:
(a) The Turnbulls were under a qualifying disability “albeit by a fine margin”: at [52] – [58]. The Associate Judge said that she could not rule out the possibility that the Turnbulls had placed complete, unquestioning faith in their son and did not receive any genuinely independent legal advice.
(b) TEL had constructive knowledge of the Turnbulls’ disability: at [59] – [67]. She said she was satisfied that there were various factors “that collectively should have sounded alarm bells” for TEL: at [66].
(c) TEL took improper advantage of the Turnbulls’ disability: [68] – [74]. The focus of the argument was not on TEL’s right to exercise its powers as mortgagee but on its ability to enforce the Turnbulls’ personal covenants. The Associate Judge accepted that there may have been procedural impropriety given that TEL had dealt exclusively with Mr Mayer and Simon Turnbull and had no contact with Mr and Mrs Turnbull. Arguably TEL should have realised that Simon Turnbull was advancing his own interests, at the expense of those of his parents. Arguably TEL knew that Ms Hart was not independent of Simon Turner, so there were risks in having her involved as she was.
Basis for appeal
[18] Mr Toebes for the appellant argued that the Associate Judge was wrong to conclude that the Turnbulls’ evidence was sufficient to show an arguable defence based on unconscionability. He submitted that the Associate Judge had wrongly applied the relevant principles. In particular, he argued that the Turnbulls were not under a qualifying disability and that TEL did not know of, or have reason to enquire about, any such disability and so did not take advantage of it. Mr Toebes argued that the Associate Judge had placed undue weight on the sale and purchase of the Queen Street property rather than focusing on the loan, which was the transaction in which TEL participated. He also opposed the appellant’s application for leave to call further evidence.
[19] Ms Cervin for the Turnbulls essentially supported the judgment of Associate Judge Sargisson. She also filed a notice supporting the judgment on other grounds, namely that both Ms Hart and Simon Turnbull acted as TEL’s agents and therefore their knowledge in relation to the Turnbulls’ situation must be imputed to TEL. Mr Toebes opposed this contention, on the basis that Simon Turnbull had no authority to act on behalf of TEL and TEL’s limited instructions to Ms Hart meant that she was not an agent for these purposes either.
Discussion
[20] There is no dispute as to the approach to be adopted on a summary judgment application. In this case TEL had to show that the Turnbulls have no arguable defence to the claim. Before turning to that, however, we deal with the application for leave to call further evidence.
Application for leave to call further evidence
[21] In general, this Court will only admit further evidence on appeal if it is fresh, credible and cogent: Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 at 192 – 193 (CA). The further evidence which the Turnbulls seek leave to adduce is a further affidavit from Mrs Turnbull annexing two newspaper articles which appeared subsequent to the hearing before Associate Judge Sargisson and an affidavit from Mr Gallagher, Ms Cervin’s instructing solicitor, annexing a letter from the Serious Fraud Office.
[22] Dealing first with the articles, both appeared in the Sunday Star-Times, the first on 1 March 2009 and the second on 6 September 2009. The first article says that the paper had material showing that TEL had advanced $4 million to Simon Turnbull’s mother-in-law, Maria de Magalhaes, secured against an apartment building in central Auckland. Maria de Magalhaes was a 73 year-old Portuguese speaker originally from Mozambique, who was in New Zealand on a visitor’s visa. The article also claims that TEL advanced two further loans totalling almost $5 million to Simon Turnbull’s sister-in-law, also named Maria de Magalhaes. It notes that the Serious Fraud Office is investigating a number of loans made by TEL to Simon Turnbull, his relatives and associated companies.
[23] The second article records an interview with Mr Mayer, in which he described how he had obtained loans from TEL in the name of relatives and associates who had little in the way of income or assets. He also described how he entered into transactions with Simon Turnbull, including those involving Simon Turnbull’s relatives and in-laws. He said that multi-million dollar loans were given to three grandchildren of Maria de Magalhaes (senior), even though one of the grandchildren was only 19 years of age. Mr Mayer described some transactions in which he said TEL was deceived, and others where he said TEL did not carry out basic checks. The article said:
[Mr Mayer] then set up deals where properties would be sold to Turnbull entities, using TEL funds. TEL thought they were cash deals but what it did not know was that Mayer and Turnbull had made arrangements for delayed payments, which meant that, in effect, TEL was putting up most of the money.
And later:
Mayer said he introduced the family members to TEL and was upfront about who they were. “They would check that it was a real person [by requiring] passport photos. They would look at the bank accounts to see that the person didn’t default, but they didn’t look to say ‘where’s your deposit?’”.
Mayer said he saw bank statements for some of the Magalhaes family members which showed that they had no more than a “couple of hundred euros” in their accounts.
[24] The letter from the SFO advises that in July 2008 the Director of the SFO authorised an investigation into a number of loan applications made to TEL. The letter notes that 29 loan applications are being investigated, including that relating to Mr and Mrs Turnbull. The letter provides some support for the claims made in the Sunday Star-Times articles in relation to Mr Mayer and Simon Turnbull and the involvement of their relatives, friends and associates. Further, the letter notes that Ms Hart appears to have been involved in a number of the transactions being investigated.
[25] Mr Toebes opposed the Turnbull’s application on the basis that:
(a) Particular weight should be accorded to finality in summary judgment proceedings. Only in exceptional circumstances should further evidence be admitted: see Lawrence v Bank of New Zealand [2001] NZCA 375; (2001) 16 PRNZ 207 (CA).
(b) In any event, the evidence was not fresh, credible or cogent. It was journalistic hearsay. If relevant, evidence could have been adduced from Mr Mayer at the hearing before Associate Judge Sargisson.
(c) The application had been made at a late stage.
(d) The matter before the Court concerned the loan application made by, and granted to, the Turnbulls. Other transactions were not relevant to the factors going to the unconscionability of that transaction.
[26] We accept that leave to adduce further evidence should not be lightly given, particularly where evidence of this type is involved and particularly in the summary judgment context, which is after all a process designed to permit unmeritorious claims and defences to be brought to an end: see Lawrence at [18]. However, we consider that we should receive the evidence, and give leave accordingly.
[27] There are two reasons for this. First, the material raises serious questions about TEL’s loan practices as they operated in respect of Mr Mayer and Simon Turnbull. The material is hearsay, may well be wrong, or at least exaggerated or misleading, and may ultimately prove to be irrelevant to the position of the Turnbulls and their loan. But we do not think it right that we ignore it at this stage.
[28] For example, the position may be that TEL, because of its relationship with Mr Mayer, Simon Turnbull and Monica de Magalhaes, made numerous substantial loans to their relatives, in-laws, friends and associates, in circumstances where the borrowers were unqualified (ie, were without substantial income, assets or relevant knowledge and experience). In other words, it may be that TEL was, in reality, indifferent to the position of the borrowers. It may also be the case that Ms Hart was nominated as the solicitor for many of these borrowers, in circumstances where TEL knew or should have known that she acted for, or was closely associated with, Mr Mayer and/or Simon Turner. This may be particularly significant if TEL knew that Mr Mayer was, or was associated with, the vendor of the properties which the borrowers whose loan applications he presented to TEL were buying. On this basis, there would be legitimate questions as to whether TEL should have been on enquiry as to the nature of the transactions that it was facilitating and as to whether the borrowers had received truly independent legal advice. There would also be the possibility of summary judgment being used in an oppressive fashion: see Dominion Breweries Limited v Countrywide Banking Corporation Limited CA314/91 18 August 1992 at 5 – 6.
[29] Second, the question of the approach TEL adopted to loan applications involving relatives, friends and associates and in-laws of Mr Mayer and Simon Turnbull is not something that the Turnbulls would or should have been aware of, or could readily have investigated, prior to the hearing of the summary judgment application. It was information largely within the knowledge of TEL and Mr Mayer and Simon Turnbull. The Turnbulls’ solicitor did ask TEL’s solicitors to provide certain specified material relating to the Turnbulls’ position by way of discovery prior to the hearing, which they did provide. However, understandably enough, this broader issue was not raised. It may be that the Turnbulls could have approached Mr Mayer, but we do not think it unreasonable that they did not. And Simon Turnbull has fled to Hong Kong.
An arguable defence?
[30] There is no dispute between the parties as to the principles to be applied in relation to unconscionability. They were summarised by this Court in Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30], in a passage approved by the Supreme Court (see [2008] 2 NZLR 735 at [6]), as follows:
- Equity will intervene to relieve a party from the rigours of the common law in respect of an unconscionable bargain.
- This equitable jurisdiction is not intended to relieve parties from “hard” bargains or to save the foolish from their foolishness. Rather, the jurisdiction operates to protect those who enter into bargains when they are under a significant disability or disadvantage from exploitation.
- A qualifying disability or disadvantage does not arise simply from an inequality of bargaining power. Rather, it is a condition or characteristic that significantly diminishes a party’s ability to assess his or her best interests. It is an open-ended concept. Characteristics that are likely to constitute a qualifying disability or disadvantage are ignorance, lack of education, illness, age, mental or physical infirmity, stress or anxiety, but other characteristics may also qualify depending upon the circumstances of the case.
- If one party is under a qualifying disability or disadvantage (the weaker party), the focus shifts to the conduct of the other party (the stronger party). The essential question is whether in the particular circumstances it is unconscionable to permit the stronger party to take the benefit of the bargain.
- Before a finding of unconscionability will be made, the stronger party must know of the weaker party’s disability or disadvantage and must “take advantage of” that disability or disadvantage.
- The requisite knowledge may be that of the principal or an agent, and may be actual or constructive. Factors associated with the substance of a transaction (for example, a marked imbalance in consideration) or the way in which a transaction was concluded (for example, the failure of one party to receive independent advice in relation to a significant transaction) may lead to a finding that the stronger party had constructive knowledge. So, in particular circumstances the stronger party may be put on enquiry, and in the absence of such enquiry, may be treated as if he or she knew of the disability or disadvantage.
- “Take advantage of” (or victimisation) in this context encompasses both the active extraction and the passive acceptance of a benefit. Accordingly, as Tipping J said in [Bowkett v Action Finance Ltd [1992] 1 NZLR 449 (HC)] at 457, an unconscionable victimisation will occur where there are:
... circumstances which are either known or which ought to be known to the stronger party in which he has an obligation in equity to say to the weaker party: no, I cannot in all good conscience accept the benefit of this transaction in these circumstances either at all or unless you have full independent advice.
[31] The Court concluded at [31]:
While factors such as a marked imbalance in consideration or procedural impropriety are generally present in unconscionability cases, neither is a prerequisite for relief. However, if there is no significant imbalance in consideration or if the weaker party received full independent legal advice it is unlikely that any issue of unconscionability will arise.
[32] In the present case, the focus was on whether the Turnbulls were arguably under a qualifying disability at the time they entered into the loan agreement and, if so, whether TEL arguably had actual or constructive knowledge of that disability and took advantage of it.
[33] Associate Judge Sargisson was clearly sceptical about whether the Turnbulls were operating under a qualifying disability, but considered that she could not rule the possibility out at this stage. As Mr Toebes argued, there are significant features in the factual background justifying that scepticism. In particular:
(a) The Turnbulls were not particularly elderly (64 and 70), Mrs Turnbull was still employed and they had some experience of home ownership and mortgages. Further, they did execute a number of documents on different occasions – the loan application, the TEL loan offer letter, the loan agreement, the sale and purchase agreement (Mr Turnbull only), the mortgage and the CCCFA disclosure documents. It is difficult to accept that they had no understanding of the effect of any of these documents.
(b) Although the Turnbulls said that they did not read the documents they were asked to sign or initial and did not appreciate their effect, it is clear that they wished to assist their son in his endeavours and did understand that they were to some extent putting themselves at risk in doing so. For example, Mrs Turnbull said in her first affidavit that she had a clear recollection of signing the loan agreement. She said:
Our son Simon was, with his wife Monica, wanting to buy a commercial property at 74 – 76 Queen St, Auckland, which was a backpackers accommodation or similar. He wanted us to help him with the purchase by guaranteeing some money that he was borrowing.
(Emphasis added.)
Accordingly, even if Mrs Turnbull did not appreciate the particular form of the transactions she entered into, she clearly had some understanding that she was assuming some form of legal liability.
[34] Against that, however, it is clear that some of the information in the loan application was incorrect. In particular, Mrs Turnbull deposed that:
(a) She and her husband have never owned a property in West Coast Road, Glen Eden.
(b) Their property in Cochrane Avenue, Arkles Bay is not worth $755,000. Rather it is worth around $355,000 and has a mortgage on it, under which approximately $243,000 is owed. The house is owned by the Turnbull Trust, which was set up at the instigation of Simon Turnbull in 2002.
In addition, Mrs Turnbull deposed that the bank statements forwarded by Mr Mayer to TEL must have been provided to him by Simon Turnbull without her knowledge and that she had never seen or been aware of the agreement for sale and purchase of the Queen Street property, which Mr Turnbull had signed.
[35] In his affidavit, Mr Turnbull confirmed that he and his wife had never owned a property in West Coast Road, although he thought his son, Simon, may have at some stage. He also confirmed that their Cochrane Avenue home was not worth $755,000. He disputed other details in the loan application form, deposing that he and his wife had never owned vehicles worth $33,000 or tools worth $55,000, and did not have $12,500 in the bank. He accepted that he had signed the sale and purchase agreement for the Queen Street property, but said that he had not read the document before doing so and did not realise that he was buying a piece of property. He also said that he had not read TEL’s loan offer letter before signing it. He had simply done as his son asked him.
[36] The existence of these false details in the application indicates either that the Turnbulls did not read the application, or were knowing parties to false statements. At this stage, we are unable to determine which is correct. Further, if the Turnbulls did not read the loan application and the other documents, that may simply be because they trusted their son and were happy to assist him as he requested, or it may indicate that they were under his influence to such an extent that they were incapable of exercising any independent judgment in considering or safeguarding their own interests. While we suspect that the former is the case, we do not feel able to rule out the latter possibility at this stage, although we note that there is no undue influence pleading.
[37] Further, there is a real question as to whether the Turnbulls received any effective legal assistance. Ms Hart was nominated in the documents as their solicitor, but:
(a) It is not clear from whom Ms Hart took her instructions. She did address an invoice for $1,091.50, dated 25 November 2006, to the Turnbulls at their home address, but both depose that they never received it, and as we indicate below, the relevant amount was taken from the proceeds of the TEL loan held in Parnell Law’s trust account.
(b) Parnell Law’s trust account records in relation to the transactions contain an unexplained payment out. They show:
The italicised payment of $174,000 is unexplained, in the sense that there is no suggestion that it was made to the Turnbulls, who were nominally Ms Hart’s clients. There is no note of any relevant instructions. The payment may have been made to Simon Turnbull, but in what capacity is unclear, or to the Turnbull Trust. In any event, this does seem to suggest that Ms Hart took her instructions from someone other than Mr and Mrs Turnbull.
(c) Ms Hart certified that a copy of Mrs Turnbull’s licence was a “true copy of the original licence”, the purpose of this being to provide photographic identification of Mrs Turnbull. However, Mrs Turnbull has deposed that she never met Ms Hart. Mr Turnbull’s evidence was that his meeting with Ms Hart was brief and perfunctory, although he acknowledged that, in response to her questioning, he indicated that he understood what he was doing.
[38] In addition, as we have already noted, the new evidence suggests that this transaction was one of a series of transactions involving unqualified borrowers (see [28] above) introduced to TEL by Mr Mayer and Simon Turnbull. It may be that TEL turned a blind eye to the position of the borrowers and their capacity to meet the indebtedness which they were incurring. We acknowledge that, on the information recorded in the loan application, TEL might well have thought that the Turnbulls had the resources to undertake substantial borrowing in order to invest in a commercial building, so that, on the face of it, they may not have appeared to be unqualified borrowers. But equally it may be, as we noted earlier, that TEL regarded the borrowers as essentially incidental, in the sense that it relied on Mr Mayer and Simon Turnbull and on the security offered rather than on the capacity of the borrowers to both understand and meet their commitments. In this context it is significant that the material before us indicates that TEL dealt with Mr Mayer, Simon Turnbull and his wife after the transactions were entered into rather than the Turnbulls.
[39] This flows over into the effectiveness of legal advice to borrowers. It may be, as the letter from the SFO suggests, that Ms Hart was involved as the solicitor for the borrower(s) in a number of TEL’s lending transactions involving Mr Mayer and Simon Turnbull. That does not, of course, necessarily mean that she did not provide effective legal assistance to the borrower(s). Nor, of itself, would it necessarily be sufficient to put TEL on enquiry. But, given that there are questions over at least some of the transactions, it does raise a question about her role, and TEL’s actual or constructive knowledge of it. These matters cannot be resolved at this stage.
[40] In the result, like Associate Judge Sargisson we do not consider that the Turnbulls’ case is a strong one but we agree with her that there is sufficient doubt to justify a refusal to grant summary judgment. The Associate Judge said at [75]:
This case may be nothing more than one of foolish and indulgent parents who went into a transaction with their eyes open to the risks. Whether that is right, or whether this is a case of a lender taking unfair advantage of naïve borrowers of advanced age, very much under the influence of their son and lacking any means to assess adequately the risks of what they were getting into, is something I cannot determine. While I incline to the view that the first scenario is the correct one, that is something that should be decided at trial.
That is an assessment with which we agree.
Decision
[41] We grant the respondents leave to adduce the further evidence. We dismiss the appeal. The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
Paul Gallagher Legal, Auckland for
Appellant
Buddle Findlay, Wellington for Respondent
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2009/574.html