Symons v Wiltshire Investments Limited [2011] NZCA 397 (19 August 2011)

Last Updated: 23 August 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA534/2010 [2011] NZCA 397

BETWEEN ROBERT MICHAEL SYMONS First Appellant

AND GREGORY JOHN SYMONS Second Appellant

AND ROBERT MICHAEL SYMONS AND ANNETTE SYMONS AS TRUSTEES OF THE ST ANTHONY TRUST Third Appellant

AND GREGORY JOHN SYMONS, CLAIRE ANNE SYMONS AND LORRAINE JEAN SYMONS AS TRUSTEES OF THE DRAKENSBERG TRUST Fourth Appellant

AND WILTSHIRE INVESTMENTS LIMITED Respondent

Hearing: 28 July 2011

Court: Randerson, Heath and Lang JJ

Counsel: M A Karam for Appellants D A Laurenson for Respondent

Judgment: 19 August 2011 at 11.30 a.m.

JUDGMENT OF THE COURT

A The appeals are dismissed.

2. The appellants are to pay costs to the respondents on a solicitor and own client basis.
   

REASONS OF THE COURT

(Given by Lang J)

Introduction

[1] These appeals arise as a consequence of advances made by the ASB Bank Ltd (“the bank”) to Opus Fintek Ltd (“Opus”) and Fibroin Initiatives Ltd (“Fibroin”).
[2] Opus was incorporated on 22 August 2001, and its shareholders were the appellants and Constellation Projects Ltd, a company associated with Mr Alan Wiltshire. The appellant Gregory Symons has always been a director of the company, whilst his brother Robert Symons was a director from the date of the company’s incorporation until 25 August 2009.
[3] Fibroin was incorporated on 22 March 2006, and its shareholders were the trustee appellants together with Mr Wiltshire and his wife Beverly. Mr Wiltshire and Mr Gregory Symons have always been directors of the company. Mr Robert Symons was also a director up until 25 August 2009.
[4] The appellants agreed to provide guarantees in respect of the indebtedness of the two companies to the bank, as did Constellation Projects Ltd and Mr Wiltshire. The contractual documents recorded that each of the guarantors was a principal debtor in respect of all the advances that the bank had made to the two companies.
[5] Opus and Fibroin were unable to repay the advances, and the bank called on the guarantors for repayment. At that point Mr Wiltshire reached an accommodation with the bank to which all of the other guarantors consented. This resulted in the bank releasing Mr Wiltshire and Constellation Projects Ltd from their guarantees. The bank then assigned the debts, together with its securities including the remaining guarantees, to another of Mr Wiltshire’s companies, Wiltshire Investments Ltd (“Wiltshire Investments”).
[6] Wiltshire Investments subsequently made demand of the appellants in respect of the amounts outstanding to it. When they failed to repay the advances, it applied for summary judgment against them. The appellants defended the application, but in a judgment delivered on 16 July 2010 Associate Judge Bell rejected their arguments and entered summary judgment in favour of Wiltshire Investments.[1] The appellants appeal to this Court against the orders made by the Associate Judge.

Grounds of appeal

[7] The appellants advance two grounds of appeal:

• (a) The Associate Judge was wrong to reject as unarguable a defence based on estoppel and/or misleading or deceptive conduct under the Fair Trading Act 1986.
• (b) The Associate Judge was wrong to conclude that Wiltshire Investments had adduced sufficient evidence to establish the quantum of its claims.

Did the appellants raise arguable defences based on estoppel or misleading and/or deceptive conduct under s 9 of the Fair Trading Act 1986?

[8] In order to understand this aspect of the appeal it is necessary to briefly set out the facts upon which the appellants sought to establish these defences.
[9] Opus acquired a shareholding in a company called Hopscotch Money Ltd. That company had been established by Hats Holdings Ltd (“Hats”). A dispute subsequently arose between Opus and Hats relating to the future involvement of Opus in Hopscotch. The parties settled that dispute on 20 November 2007, when they entered into a written agreement under which Hats acquired the shares held by Opus in Hopscotch for the sum of $5.2 million. Hats was to pay that sum by way of an initial payment of $500,000 in November 2007. It was then required to make two further payments, each of $2.35 million, on 20 March and 20 May 2008.
[10] Hats duly paid the first instalment owing under the agreement, but refused to pay the second. When Opus commenced proceedings in the High Court to recover the outstanding balance, Hats counterclaimed for a significantly higher sum. It based its counterclaim on allegations of misconduct and breach of directors’ duties by the appellants Gregory and Robert Symons.
[11] By September 2009, the litigation between Opus and Hats had been in progress for more than a year. It had been funded throughout by Mr Wiltshire. Because of their involvement in the events that gave rise to the counterclaim, the Symons brothers had been closely involved in the defence of the counterclaim. They did not, however, contribute to the funding of the litigation. They left that entirely to Mr Wiltshire.
[12] On 4 September 2009, Wiltshire Investments exercised its power under the securities it had acquired from the ASB Bank to appoint a receiver to take control of Opus.
[13] The receiver subsequently entered into settlement discussions with Hats and, in early December 2009, he concluded a full and final settlement of all outstanding claims. This resulted in both parties discontinuing their claims against each other. The terms of the settlement were recorded in a written agreement. Wiltshire Investments declined to provide any details of the settlement to the appellants on the ground that the terms of settlement were confidential to the parties.
[14] By the time the application for summary judgment was heard, Hats had paid a total sum of $1.4 million to Opus pursuant to the agreed terms of settlement. Although the receiver applied these payments in reduction of the advances owing by Opus, a substantial balance remained outstanding in respect of those advances. The funds received from the Hats settlement did not reduce the Fibroin debt at all.
[15] The proposed defences are said to arise out of a letter Mr Wiltshire sent to Gregory and Robert Symons by email on 7 October 2009, three days after his company appointed the receiver. The appellants say that statements made in the letter amounted to a promise or representation by Wiltshire Investments that it would settle the Hats litigation on terms that would enable their indebtedness to Opus and Fibroin to be extinguished. Alternatively, they contend that the statements amounted to an unequivocal assurance that Wiltshire Investments would not call up or endeavour to enforce repayment of the debts that it had acquired from the bank.
[16] The appellants rely in this regard upon the following passages from the letter:

...

Rob and Greg I am sorry it has come to this. I am also sorry that you are personally in an unenviable financial position. I trust that you will see that stopping the [Hats] case is the best option all round. It will provide you certainty and remove the need to complete the work required to run the case. I hope you can now concentrate fully on looking after your families and businesses, something I can appreciate as this saga is also having a very much unwanted impact on my family and business. As you have said in your emails ‘you will always put family and business first’. It is now time that I must also do the same.

As a shareholder I had provided guarantees to ASB which have been called upon. By buying out the ASB I also bought the ability to put the companies into receivership. After a lot of thought, principally surrounding the consequences of the PAYE matter and acting on the independent legal advice, I decided on Friday 4th of September to cease funding the Opus Fintek/Hats proceedings and to place Opus Fintek Ltd in receivership.

By placing Opus Fintek in receivership it gives me the power to negotiate with Richard Bradley to drop the actions against the company and you both personally. This is something I will do strongly, as I do want to obtain certainty and closure for you both, as well as for me. With Rob Latton pulling out of Lee Salmon Long, now is the ideal time to cease the action and negotiate with Bradley, and to negotiate that costs lie where they fall. A receiver will also be able to deal with creditors more effectively over the time period required to negotiate the ceasing of all the actions with Bradley.

[17] Significantly, the appellants do not claim that the letter was preceded or followed by discussions with Mr Wiltshire that could lend support to the view that they take of the statements made in the letter. Those statements therefore form the entire basis for the proposed counterclaims.
[18] In order to establish an arguable defence based on estoppel, the appellants would need to adduce evidence suggesting that Mr Wiltshire made a clear and unequivocal promise or assurance, and that he intended that assurance to affect the legal relations between the parties.[2] In order to found an arguable counterclaim based on misleading or deceptive conduct under s 9 of the Fair Trading Act 1986, the appellants would need to show that it is arguably likely that a reasonable person in their situation would have been misled by the statements made in the letter.[3]
[19] Like the Associate Judge, we do not consider that the passages upon which the appellants rely are sufficient to provide an arguable basis for either of the proposed counterclaims. They relate only to Mr Wiltshire’s decision to cease funding the Hats litigation, and to appoint a receiver to negotiate a settlement of that litigation as soon as possible. The “certainty and closure” to which Mr Wiltshire refers in the final paragraph obviously relate to those matters and not to any wider issue.
[20] This is confirmed when one reads the whole of the letter. It describes in detail the process that led Mr Wiltshire to conclude that the prospect of winning the Hats litigation was “no better than 50/50”. One factor that helped persuade him to this view was that he was no longer convinced that Gregory and Robert Symons had the ability to deliver what was necessary to win the case. In addition, Mr Wiltshire had become aware that both men were personally under significant financial pressure. The letter says that Mr Gregory Symons faced the possibility of criminal proceedings, personal bankruptcy and the liquidation of his companies. Mr Wiltshire believed that these issues could affect the credibility of their evidence at trial.
[21] The letter also discloses that the personal relationship between Mr Wiltshire and the brothers had become strained. This is discernible from the paragraph in the letter immediately preceding the three paragraphs set out above at [16]:

Your actions of the last two weeks, most particularly the threats to implicate me, your resignations as Directors and the instructions on Thursday to Duncan Cotterill to wind Opus Fintek up have caused further and irreparable damage to our relationship. In all, the prospect of winning the case in my opinion is now no better than 50/50. At these odds I am not prepared to be reliant on the goodwill of creditors. I am also not prepared to accept that the work required to win the case will in fact be done. ...

[22] We do not consider that the letter from Mr Wiltshire comes close to amounting to an unequivocal promise or assurance of the type that the appellants would need to establish in order to advance an arguable defence under either head. Nor do we consider that any reasonable person in the position of the appellants could have been misled or deceived by the wording that Mr Wiltshire used in the letter. A reasonable person would have taken the letter at face value, and would not have attributed to it the added meaning for which the appellants now contend.
[23] For these reasons we agree with the Associate Judge that the appellants failed to establish an arguable defence based either on estoppel or misleading and/or deceptive conduct under s 9 of the Fair Trading Act 1986.

Was the Associate Judge wrong to conclude that Wiltshire Investments had proved the quantum of its claim?

[24] This issue arises principally because Wiltshire Investments has taken a remarkably casual approach to the issue of quantum.
[25] The notices of demand that Wiltshire Investments served on Gregory and Robert Symons on 18 December 2009 sought payment of the sum of $2,704.913.08 in respect of the Opus debt and $865,750.99 in respect of the Fibroin debt. When the Symons brothers received the notices of demand, their solicitors sought clarification from Wiltshire Investments regarding the manner in which it had calculated the sums claimed in the notices. The solicitors acting for Wiltshire Investments declined to provide any further information at that stage. They said only that the quantum of the amounts claimed would be dealt with in the application for summary judgment that Wiltshire Investments proposed to file.
[26] Wiltshire Investments served notices of demand on the trustee appellants on 10 February 2010. These related only to the Opus debt. No demand was made of the trustees in respect of the Fibroin debt. Although two months had passed since service of the demands on Gregory and Robert Symons, the notices still sought payment of the sum of $2,704,913.08 in relation to the Opus debt. Wiltshire Investments made no attempt at that stage to update the notices of demand to take into account interest accrued and payments received between 18 December 2009 and 10 February 2010.
[27] It later transpired that the Opus loan had been reduced by the sum of $900,000 as a result of payments that the receiver had received and paid to Wiltshire Investments during that period following settlement of the Hats litigation. The notices of demand that Wiltshire Investments served on the trustee appellants omitted to take those payments into account.
[28] Wiltshire Investments filed its application for summary judgment one week later, on 17 February 2010. It sought judgment against the appellants for the same amounts as Wiltshire Investments had sought in the notices of demand that it had served on them earlier. It did not seek judgment in respect of interest accrued after 18 December 2009. Moreover, although the statement of claim in each proceeding recorded that Opus had paid Wiltshire Investments the sum of $900,000 as a result of the settlement of the Hats litigation, it wrongly gave the impression that those payments had been taken into account in calculating the amount outstanding in respect of the Opus debt. Counsel for Wiltshire Investments frankly concedes that the statements of claim were deficient in these respects.
[29] Wiltshire Investments sought to rectify these deficiencies by filing affidavits in reply to the documents that the appellants had filed in opposition to the application for summary judgment. These comprised an affidavit by the receiver and a second affidavit by Mr Wiltshire. Annexed to the receiver’s affidavit was his six monthly report to creditors in respect of the period between 4 September 2009 and 4 March 2010. This recorded that the receiver had settled the Hats litigation and received a total sum of $1.15 million during the reporting period.
[30] Mr Wiltshire’s affidavit contained a detailed spreadsheet showing that a total sum of $1.4 million had been received following settlement of the Hats litigation, and that this sum had been applied against the Opus debt. As a result, the sum of $1,144,504.77 remained outstanding as at 25 May 2010 in respect of that debt. The sum of $840,769.05 remained outstanding in relation to the Fibroin debt. The Associate Judge used these figures as the basis for the amounts in respect of which he entered judgment against the appellants in the High Court.
[31] Counsel for the appellants did not take issue with the manner in which Wiltshire Investments calculated the amount of principal and interest outstanding in relation to either debt. His clients’ concern arose out of the refusal by Wiltshire Investments to disclose the terms of the Hats settlement. He contended that the Court could not be sure that the sum of $1.4 million represented the total amount that Wiltshire Investments had received under the terms of the settlement. He argued that the uncertainty surrounding this aspect of the plaintiff’s claim was sufficient to justify the Associate Judge withholding the entry of summary judgment.
[32] It needs to be remembered, however, that the appellants were principal debtors in respect of both advances. As a result, it was open to Wiltshire Investments to proceed against them individually at any time for the full amount outstanding in respect of each advance. The settlement of the Hats litigation obviously provided a potential source of funds from which the appellants’ exposure to Wiltshire Investments might be reduced. The settlement was only relevant, however, to the extent that it had enabled Opus to reduce the amount outstanding to Wiltshire Investments as at the date of the hearing in the High Court.
[33] The appellants did not suggest that the schedule attached to Mr Wiltshire’s second affidavit was incorrect. It only related, however, to transactions occurring up to and including 28 May 2010. Their concern arose because it did not include the period between 28 May 2010 and the hearing in the High Court on 16 July 2010. In order to clarify this issue, we issued a minute after the hearing in this Court inviting counsel for Wiltshire Investments to file a further memorandum or affidavit setting out the consideration received up to and including 16 July 2010 in respect of the settlement of the Hats litigation
[34] Wiltshire Investments subsequently filed a further affidavit by Mr Wiltshire in which he deposes that the settlement required Hats to pay Opus a total sum of $1.4 million in six instalments. He says that Opus received the last of these payments on 30 March 2010, and that nothing further remains owing under the terms of the settlement.
[35] Mr Gregory Symons filed an affidavit in response in which he expresses concern that the full terms of the settlement have not yet been disclosed.
[36] The information in Mr Wiltshire’s latest affidavit satisfies us, however, that all of the sums that Opus received and paid to Wiltshire Investments were taken into account in calculating the amounts for which judgment was to be entered against the appellants. It follows that summary judgment cannot be denied on the basis that Wiltshire Investments failed to properly calculate the quantum of its claim in respect of the Opus debt.

Result

[37] The appeals are dismissed.

Costs

[38] The contractual arrangements between the parties require the appellants to fully reimburse Wiltshire Investments in respect of any costs that it incurs in enforcing its securities. For that reason the respondent is entitled to the costs of both proceedings on a solicitor and own client basis.

Solicitors:
Quay Law, Auckland for Appellant
Hornabrook Macdonald, Auckland for Respondent

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[1] Wiltshire Investments Ltd v Symons HC Auckland CIV-2010-404-1011, 26 July 2010.
[2] Laws of New Zealand Estoppel (online ed) at [68].
[3] Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at 503.