Bell v Lal [2012] NZHC 1698 (13 July 2012)

Last Updated: 13 August 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-005601 [2012] NZHC 1698

BETWEEN ELAINE CATHARINA BELL Plaintiff

AND RAINA LAL First Defendant

AND RENEE DEVINA SINA LAL Second Defendant

Hearing: 3 July 2012

Appearances: E St John for Plaintiff

K M Quinn for First and Second Defendants

Judgment: 13 July 2012

_{JUDGMENT OF GODDARD J}

This judgment was delivered by Justice Goddard on

13 July 2012 at 5.30 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors: Palmer & Associates, P O Box 74062, Auckland 1546

Fax: [phone]

Rogers & Rutherford, P O Box 2330 Shortland Street, Auckland 1140

Fax: [phone]

Counsel: E St John, P O Box 105270, Auckland 1143

Fax: [phone]

K M Quinn, L22 Lumley Centre, Auckland 1010

_{Fax: [phone] – Email:} [e-mail]

BELL V LAL HC AK CIV-2011-404-005601 [13 July 2012]

[1] Before the Court are three applications: an application for summary judgment and an application for a freezing order, both filed by the plaintiff; and an application by the defendants to stay a judgment of Woodhouse J delivered on 7 June

2012, dismissing the defendants’ protest to jurisdiction.[1]

[2] In logical order of sequence the argument in support of the application for a stay of Woodhouse J’s judgment relating to jurisdiction proceeded first and occupied the bulk of hearing time.

[3] The background to all three applications is a claim for debt by the plaintiff in the sum of $430,000 plus interest. This comprises the balance owing on a loan of

$500,000 the plaintiff made to the defendants in September 2007. The history of that loan, as set out by the plaintiff in her affidavit evidence and as evidenced in email and other forms of communication between the plaintiff and the first and second defendants, was traversed in detail by Woodhouse J in his judgment. It is unnecessary to retraverse that same history in extenso here. It will suffice to briefly

_{set out the matters of significance that are detailed in the judgment:}

A “Final agreement” between the parties was recorded in an email of 10

September 2007 to the plaintiff from the second defendant on behalf of both defendants. This set out the terms of the loan agreement, which was to be for

3 months at an interest rate of 24 per cent per annum. The security for the loan was stated in the agreement as:

Caveat over 7 Awarua Crescent, Orakei (we will cover your

solicitor’s costs for this)

Personal Guarantees by both Raina & Renee Lal

Both defendants were in Fiji at the time of signing the agreement. However,

_{the first defendant’s residence was in Auckland.}

Each defendant also signed a personal guarantee, expressly acknowledging

_{the loan in the following terms:}

The lender has agreed to lend to the Borrower who has promised to pay back the sum of NZ$500,000.00 (Five Hundred Thousand Dollars) cash together with interest at the rate of 24% per annum.

The Borrower shall pay the sum borrowed within 6 (six) months from the date of execution. In default the whole sum to be payable UPON DEMAND by the lender.

Woodhouse J noted that these guarantees were signed on 7 September 2007 and witnessed by a Commissioner of Oaths. The guarantee signed by the first

_{defendant again recorded her address as Auckland, New Zealand.}

Woodhouse J noted that the guarantee documents were prepared by the defendants, both of whom are lawyers, or on their behalf, and that evidence proffered in February 2012 by the defendants in protest of jurisdiction - that they could not by that stage recall signing the guarantees - was “disingenuous

_{at the least”.}

The loan money was advanced in three tranches to bank accounts in three

_{different jurisdictions, one of those being New Zealand.}

Some repayment and interest payments were made in December 2007 and through early 2008. All of these payments were in New Zealand dollars and

_{were made in New Zealand.}

Between September 2008 and October 2009 a series of emails was exchanged between the plaintiff and the defendants, in which the defendants proffered various reasons for their inability to repay the debt during that period. These included the unstable political situation and state of the economy in Fiji. In all of these e-mails the defendants sought further time to pay. The emails contain numerous actual or implied acknowledgements of the debt as owing, and also make reference to the caveat for security over the

_{family property in Orakei, Auckland.}

The second defendant did not make herself available to be served with the

plaintiff’s summary judgment application until after an order for substituted

service was made. She was subsequently served in Fiji. The first defendant was served in Fiji on 9 December 2011. Woodhouse J was satisfied that the plaintiff had established that leave to serve the proceeding on both defendants in Fiji was correctly granted.

[4] Having traversed the evidence with a considerable degree of care, Woodhouse J was satisfied that the plaintiff ’s claim “has a clear and substantial connection with New Zealand” and “that the proper law of the contract is the law of New Zealand”. He found that six of the 11 factors, identified in decisions of New Zealand and English courts for determining the applicable law when there is no express choice, favoured New Zealand as the proper legal forum. The following extracts are relevant:

[32] ... New Zealand is the place where the contract was made; New Zealand is the place where the contract is to be performed; part of the subject matter of the contract (the security) is real property in New Zealand; payment is to be made in New Zealand dollars; there is a connection with a previous transaction fully conducted in New Zealand; on the basis of the defendants’ case the contract may be void or voidable under the Fiji Money Lenders Act, but there is no argument to similar effect under New Zealand law.

...

[33] ... the loan was designated in New Zealand dollars; it was repayable in New Zealand dollars; part of the loan was paid into a bank account in New Zealand; the real property provided as security is owned by the second defendant; and ... the first defendant was living in New Zealand when the contract was made.

[5] For all of the above reasons Woodhouse J was able to conclude that the plaintiff had discharged the onus on her to establish New Zealand as the appropriate forum (based on suitability or appropriateness of the jurisdiction rather than convenience) and that she had founded a jurisdiction as of right in accordance with New Zealand law. The only alleged need to call evidence from any witnesses who might be resident in Fiji arose from the “disingenuous” issue tentatively raised by the defendants as to whether each of them had in fact signed the “guarantees”.

[6] The defendants’ applications under rr 5.49 and 6.29 were dismissed and their appearances under protest to jurisdiction set aside. Then followed a series of timetable orders, including an order that any notice of opposition and affidavits

setting out a defence to the summary judgment application were to be filed and served on or before 22 June 2012; and an order that the application for summary judgment would be heard today, 3 July 2012.

[7] The defendants subsequently retained and instructed new solicitors and counsel.

[8] On 22 June 2012, the date appointed for the filing of any notice of opposition to the entry of summary judgment, the defendants chose instead to file an appeal against the judgment of Woodhouse J and sought an application for stay of proceedings in this Court.

Argument in support of stay of proceedings

[9] In support of the application for a stay of proceedings, pending determination of the appeal, four essential grounds were advanced on behalf of the defendants. Relying on the list of factors to be taken into account for stay applications, as set out by the Court of Appeal in Keung v GBR Investment Ltd,[2] Mr Quinn identified the

_{following four factors as relevant and applicable:}

Refusal of the stay would place the defendants in an invidious position of having to either take a step in the proceeding by filing late papers in opposition to summary judgment; or alternatively by allowing summary judgment to be entered against them. If summary judgment were entered against them, their protest to jurisdiction would become irrelevant. Mr Quinn relied on the decision of the Court of Appeal in Advanced Cardiovascular Systems Inc v Universal Specialties Ltd[3] as authority for the proposition that it would be a procedural error to allow the summary judgment application to go to a hearing “before the initial question of jurisdiction is determined”. For this Court to entertain the summary judgment application and refuse the stay would render nugatory the defendants’ appeal against the setting aside of

_{their protest in jurisdiction. It would force the defendants either to accept the}

jurisdiction of the New Zealand Court, or to accept that final judgment would

_{be entered against them. In either case their appeal would become pointless.}

The second ground was directed to the bona fides of the appeal. In support of this, Mr Quinn referred to the grounds set out in the notice of appeal, submitting that the appeal is based on a serious point of law and is meritorious; that it is not simply an appeal against findings of fact. In terms of the factual issues arising, he pointed to the fact that the guarantee documents were executed in Fiji; that the money was loaned to Fijian citizens; and that one of the tranches of money advanced was in Fijian dollars

_{for investment in Fiji.}

The third ground of argument was lack of prejudice to the plaintiff from the granting of a stay. Mr Quinn pointed out that the plaintiff’s claim is for a liquidated sum, with interest continuing to accrue at 24 per cent. (In relation to that point, however, it is appropriate to record here that the plaintiff has, in

_{fact, received no interest since 2007, let alone repayment of principal).}

Mr Quinn submitted that, as Woodhouse J had noted at [32] of his judgment, the loan agreement may be void or voidable under the Fiji Money Lenders Act, chapter 234 of the Laws of Fiji. He suggested that possibility provided ample explanation for the defendants to seek an appeal and an absence of

_{reason to assume that the appeal is not bona fide.}

The next ground advanced in support of a stay of proceedings was that no delay would arise as a result of the stay - the plaintiff’s claim being for a liquidated sum, with interest continuing to accrue at 24 per cent. Further, as the plaintiff did not commence the claim proceeding until late 2011, it is

_{incongruous for her to complain about delay.}

The next ground in support of a stay was the overall balance of convenience.

Under this head Mr Quinn argued that, as there has been no substantive judgment entered in this case, there are no fruits of a judgment of which the plaintiff is being deprived. In contrast, the defendants have a position that

needs to be preserved, in case their appeal is successful. The proceedings in the present case are still at an interlocutory stage. Thus, if a stay is not granted and the defendants’ appeal ultimately succeeds, the damage and inconvenience to them will be considerable. Mr Quinn submitted that by the time the appeal is heard the plaintiff will have obtained judgment essentially by default and will have become entitled to execute the judgment. By contrast, if a stay were granted and the appeal ultimately fails the plaintiff is able immediately to pursue her summary judgment application, so is not inconvenienced.

Discussion

[10] Notwithstanding, Mr Quinn’s careful and well presented arguments I am not persuaded that the discretion of the Court should be exercised in favour of a grant of stay in this matter.

[11] The defendants have defaulted on their obligations under this short-term loan, due to have been repaid in December 2007, since at least early 2008. No principal or interest has been paid since at least early 2008.

[12] The implication (and it is no more than that) that the debt may belatedly be contested has not been frankly notified to date by the filing of a notice of opposition to the plaintiff’s application for summary judgment.

[13] The implication that there may be a contest about whether the debt is owing comes very late in the five year history of the transaction between the parties. Furthermore, the filing of the appeal and the steps now being taken by the defendants come late in the course of this proceeding and reflect to a degree on the bona fides of their intentions and approach.

[14] The defendants were ordered to file any notice of opposition and affidavits in support by 22 June 2012. They did not do so but instead elected to file an appeal in relation to the jurisdiction issue. While they were entitled to take that step and thus elect not to comply with the timetable order for opposing the entry of summary

judgment, they nevertheless remain in a situation where there is no formal contest to

the plaintiff’s claim that a debt has been owing to her since 2007.

[15] There has been no repudiation of the many actual and implied acknowledgements of the debt as being due and owing evident in the exchange of emails between September 2008 and October 2009. These set out numerous reasons as to why the debt was not able to be repaid during that period. All that was being put forward were reasons why it could not be repaid at that time. The onus was on the defendants to either repay the debt or repudiate it; or to at least continue paying interest at the rate agreed while the debt remained outstanding.

[16] The challenge to the jurisdiction of the New Zealand courts and the raising of the possible application of the Fiji Money Lenders Act comes very late in the history of the transaction and at a late stage of these proceedings. That is not to determine them as having no validity but the lateness of their being raised is a factor to consider in the exercise of discretion to grant a stay.

[17] While it is not for this Court to make observations on the likely outcome of the defendants’ appeal, the appeal lacks apparent strength in light of the history of the transaction and the numerous evidential factors favouring the jurisdiction of the New Zealand courts.

[18] The plaintiff has now been kept out of her entitlement to her money for an unconscionably long period, without the furnishing of any substantive defence.

[19] Since proceedings were issued the defendants have not offered to pay any money into court. In contrast, the plaintiff has given an undertaking as to damages in relation to her application for a freezing order over the Orakei property.

[20] Taking all of the above into account, I am satisfied this Court should not exercise its discretion in favour of a stay of the plaintiff’s summary judgment, pending disposition of the defendants’ appeal on the jurisdiction point. This will not necessarily render the defendants’ appeal nugatory, as the making of new timetable orders in relation to the summary judgment have been discussed with counsel and

will be made at the conclusion of this judgment. It will be for the defendants to expedite the determination of their appeal and the filing of any opposition to summary judgment.

Application for freezing order

[21] There has been no further reduction in the debt nor interest paid on the outstanding amount since early 2008, more than four years ago.

[22] The security for the debt is over a property owned by a family member of the defendants, located at 7 Awarua Crescent, Orakei, Auckland.

[23] There is a caveat over that property by way of security. This was recorded in the “Final agreement”, together with an undertaking by the defendants to cover the plaintiff’s solicitor’s costs in connection with lodging the caveat.

[24] Affidavit evidence filed the day before this hearing, Monday 12 July 2012, establishes there have been mortgage arrears on the secured property and that there was an indication of intention by the mortgagee to have proceeded to a mortgagee sale. An email letter from the credit controller of the mortgagee informs that, only as late as 2 July, the loan arrears were paid and there is a current credit, and that a monthly automatic payment has now been set up to pay future loan instalments. The letter ends with the advice “At this time we will not be proceeding to a mortgagee sale”.

[25] The above history, together with the recent indication that a mortgagee sale of the property was contemplated, both favour the granting of the freezing order sought by the plaintiff, in order to preserve her position pending disposition of the summary judgment.

[26] Woodhouse J referred to the importance of the security over the property in realising the plaintiff’s contractual rights. He stated:

[38] ... The proceeding has not been issued to enforce the security. However, if the plaintiff succeeds, the contract will have been sustained and

the plaintiff will be entitled to enforce what the defendants expressly referred to as security over the land in New Zealand.

The application for summary judgment

[27] In light of the decision I have reached in relation to the applications for a stay and for a freezing order, I deem it prudent to permit the defendants one further opportunity to decide if they wish to oppose the entry of summary judgment. I am not, therefore, prepared to enter judgment at this time. Thus the course I am adopting does not force the defendants into an invidious position. They are at liberty to seek a fast track hearing for their appeal already filed and they should seek to have that determined prior to 8 August 2012, when the application for summary judgment will be heard in this Court at 10:00 a.m.

Result

[28] The defendants’ application for a stay of Woodhouse J’s judgment of 7 June

2012 is dismissed.

[29] The plaintiff ’s application for a freezing order over the property at 7 Awarua

Crescent, Orakei, Auckland is granted.

[30] The freezing order restrains the second defendant from removing the asset that is the property at 7 Awarua Crescent, Orakei, Auckland, or from disposing, dealing with, or diminishing the value of that asset, including but not limited to mortgaging the asset.

[31] The freezing order remains in force until further order of the Court.

[32] The plaintiff’s summary judgment application is adjourned until Wednesday

8 August 2012.

[33] Any notice of opposition and any affidavit in support setting out the defence is to be filed and served on or before Wednesday 25 July.

[34] Any statement of defence is to be filed and served by Wednesday 25 July and any affidavit in reply by or on behalf of the plaintiff is to be filed and served by Wednesday 1 August.

Costs

[35] Costs on a 2B basis are reserved.

---

[1] Bell v Lal [2012] NZHC 1264.
[2] _{Keung v GBR Investment Ltd [2010] NZCA 396.}

[3] Advanced Cardiovascular Systems Inc v Universal Specialities Ltd [1997] 1 NZLR 186; (1996)

9 PRNZ 632.