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High Court of New Zealand Decisions |
Last Updated: 23 March 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2011-409-001680 [2012] NZHC 423
BETWEEN MCARTHUR RIDGE INVESTMENTS LIMITED
Plaintiff
AND ROBIN ANTHONY SCHULZ Defendant
Hearing: 23 February 2012 (Heard at Christchurch)
Appearances: T J Shiels for Plaintiff
D M Lester for Defendant
Judgment: 15 March 2012
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
UPON PLAINTIFF’S SUMMARY JUDGMENT APPLICATION
[1] The plaintiff – I will refer to it as McArthur Ridge – sues Mr Schulz in relation to debts he guaranteed. Mr Schulz, in opposition to the summary judgment application, raises some important matters concerning the pleading and evidence of the plaintiff’s mortgagee sale process but Mr Lester, for Mr Schulz, focused attention specifically on the quantum of the plaintiff’s claim. Liability is not in issue.
The agreed history
[2] Mr Schulz accepts that the contracts relied upon by McArthur Ridge existed as pleaded.
MCARTHUR RIDGE INVESTMENTS LIMITED V SCHULZ HC CHCH CIV-2011-409-001680 [15 March
2012]
[3] A number of loan contracts are referred to in McArthur Ridge’s pleadings but only two are sued upon as remaining in debit. I will refer to them as the “first loan” and “second loan” for convenience (although they had been preceded by an earlier loan, not in issue).
[4] Southland Finance Limited (Southland Finance) and Central Otago Vintners’ Limited (“COVL”) entered into the first loan contract on 7 March 2008. Mr Schulz guaranteed COVL’s obligations and (as between Southland Finance and himself) was deemed to be a party to the contract on the same terms as COVL. The first loan was denominated by Southland Finance as Loan 34007910.
[5] The second loan contract was entered into by Southland Finance and COVL on 2 May 2008. The obligations of COVL under the second loan were also guaranteed by Mr Schulz. The second loan was initially denominated as Loan
34008168 although the loan was subsequently transferred (apparently for the
lender’s accounting purposes) to a new account denominated as 34010623. [6] COVL drew down on the loans as intended.
[7] On 1 October 2008, Southland Finance was amalgamated with South
Canterbury Finance Limited (now in receivership) (“SCF”).
[8] In July 2011, SCF sold its rights, title and interest in the indebtedness of COVL to SCF (including the associated security documents) to McArthur Ridge for a transfer price of $30,000 (together with a share of any recovery up to $70,000).
[9] While it held the debt, SCF proceeded with a mortgagee sale of land held as security for the loans. Mr Schulz accepts that the notices required under the Property Law Act 2007 were duly served by SCF on COVL and on himself.
[10] Mr Schulz also accepts that when McArthur Ridge took over the loans, McArthur Ridge duly served the required demands calling for repayment of the loans. (There is one area of dispute in relation to demands, to which I will return below, and that relates to default interest).
[11] The demands made by McArthur Ridge upon Mr Schulz, on 16 August 2011, were –
For the first loan $811,867.22
For the second loan $358,793.98
Total $1,170,661.20
[12] The demands were supported by statements of account dated 12 July 2011 which set out all debits and credits for the periods since first advance.
[13] It is common ground that McArthur Ridge’s calculation of the balance of the first loan includes default interest whereas the calculation of the balance owing under the second loan has no default interest element.
Plaintiff ’s summary judgment application
[14] The starting point for a plaintiff’s summary judgment application is r 12.2(1) High Court Rules, which requires that the plaintiff satisfy the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.
[15] I summarise the general principles which I adopt in relation to this application:
(a) Commonsense, flexibility and a sense of justice are required.[1]
(b) The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.
(c) The Court will not hesitate to decide questions of law where appropriate.
(d) The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.
(e) In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(f) In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation.
(g) In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(h) Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process,
(i) Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
[16] A significant different arose in the submissions of counsel as to the Court’s approach to the pleading of and evidence in relation to the mortgagee sales in the context of summary judgment. Mr Lester placed reliance on the observations of Duffy J in Westpac New Zealand Ltd v Cooper[2]. When this proceeding had been threatened Mr Lester had addressed comment to SCF’s then solicitors as to the
propriety of the mortgagee sale process. For McArthur Ridge, Mr Shiels’
submissions on the mortgagee sales aspects focussed on the amended pleading and the additional evidence which McArthur Ridge had filed. Mr Shiels submitted that, in any event, the plaintiff had discharged its obligations in its initial summary judgment application and evidence through verification of the statement of claim and the allegations made in it. The approach of the Court of Appeal in Australian
Guarantee Corporation (NZ) Ltd v McBeth[3] is of the general nature adopted by Mr
Shiels.
[17] In his submissions for Mr Schulz, Mr Lester also placed reliance upon the decision of Asher J in Public Trustee v Ottow[4] in which his Honour had identified a list of six steps which indicate that a mortgagee has made reasonable efforts to obtain the best obtainable price. Mr Lester’s submission was that the evidence in this case discloses none of the six listed steps and that such gaps in SCF’s mortgagee sale process of themselves at least arguably point to a breach of s 187 Property Law Act
2007 which sets out the duty of reasonable care upon a mortgagee to obtain the best price reasonably obtainable as at the time of sale.
[18] I will return also (below [63]) to these submissions as they apply to this case.
Mr Schulz’s grounds of opposition
[19] Mr Schulz, in his notice of opposition, denied that there were any arrears properly due in relation to the loan contracts for three principal reasons –
(a) A proper accounting by SCF (in receivership) has not occurred in respect of the sale proceeds achieved by SCF when it realised the secured property;
(b) The penalty rate of interest claimed is a true penalty. The standard rate is more than sufficient to compensate for late payment.
(c) In any event, SCF was in breach of its duty under s 187 Property Law Act in that it did not properly market the secured property, conducting a brief tender process over the Christmas/New Year period 2008/2009.
Account reconciliation
[20] Mr Schulz’s complaint under this head is that as SCF realised its various securities (land and plant and stock) the level of accounting information provided to COVL and to Mr Schulz did not permit the debtors to cross-check that all realisations had been accounted for and credited. The fact that assets were being realised both in the receivership of COVL and through SCF’s mortgagee sale added complexity. The evidence is that SCF had the receivers of COVL carry out the marketing of the property in conjunction with the marketing of the assets in the control of the receivers.
[21] Even allowing for questions which Mr Schulz has raised concerning certain items of realisation, it is clear that Mr Schulz would still have a significant balance of debt to McArthur Ridge (assuming Mr Schulz’s other complaints do not affect the balance). By reason of the other findings which I come to it is strictly unnecessary that I make a finding as to the precise balance owing – and given that that will be a matter for trial, it is appropriate that I refrain from purporting to express a definitive finding.
[22] Mr Shiels, in the course of his submissions, took up Mr Schulz’s effective challenge and responded to the relatively small group of question marks raised by Mr Schulz or his accounting witness, Richard Sissons.
[23] In the circumstances, I will refer only briefly to the evidence of reconciliation provided by McArthur Ridge. The principal deponents with regard to reconciliation were Gary McCosh, a manager who acted on behalf of the receivers of SCF, and Duncan Fea, one of the two receivers of COVL.
[24] In response to questions as to how sums received during the sale of the property and of the other assets were accounted for, Mr Fea identified the four sums
of recovery ($1,912,835.30; $3,000,000; $100,000; and $103,442.43), which in each case are exactly accounted for in the 12 July 2011 reconciliation provided by SCF.
[25] A further query of Mr Schulz and of Mr Sissons related to proceeds from the sale of a harvester for which COVL had obtained a separate loan from Southland Finance. The harvester loan account had been denominated number 34007967. In his evidence, Mr McCosh identified the receipt of three payments ($290,000;
$7,528.01; and 0.90) received from the realisation of the harvester. Using the account reconciliations Mr McCosh followed the payment of those sums into the first loan account (34007910) and then the debiting of that account and the crediting of the harvester account (34007967) with the result that the harvester loan account was repaid in full.
[26] These are examples of the reconciliation issues raised by Mr Schulz and/or Mr Sissons. They were understandable queries given that the account reconciliations carried no detailed narrative (other than notations such as “payment” or “transfer”).
[27] Mr Shiels tackled each of the raised issues in the course of his submissions. I did not understand Mr Lester to strongly suggest in his response that there were any serious issues of reconciliation remaining. That was equally my tentative but strong conclusion. In the event, however, I do not need to make a final determination on that matter.
Default rate of interest as a true penalty
[28] Mr Schulz’s complaint as to the default rate of interest applies only to the
first loan.
[29] In that contract the interpretation clause provides –
“Default Interest Rate” means with respect to each Interest Period a rate
that is ten per cent (10%) per annum above the Interest Rate.
The Interest Rate under the first contract was 15 per cent per annum.
The contract provided in relation to default interest on overdue sums –
The Borrower shall pay to the Lender interest calculated on a daily basis at the Default Interest Rate on all moneys (including interest) payable under this Agreement which may from time to time be overdue, such interest to accrue after as well as before judgment and be payable on demand being made by the Lender.
Although the second contract (entered into two months later) had exactly the same provisions, McArthur Ridge does not in this proceeding claim penalty interest on that contract.
[30] Southland Finance’s penalty interest rate under the first contract entered into with COVL (and guaranteed by Mr Schulz) on 19 April 2007 had exactly the same penalty interest rate (interest rate plus 10 per cent per annum).
[31] Mr Lester noted, correctly, that the 2008 penalty interest provisions are all contained within the apparently standard “Schedule of Standard Terms and Conditions” of Southland Finance with the 10 per cent rate appearing as part of the pre-typed material.
[32] Again, in the pre-litigation correspondence between the lawyers, Mr Lester had raised this issue. With reference to the single statement which he had seen to that date (3 August 2011) he referred to the penalty interest rate claimed as being “plainly a true penalty and thus unenforceable”.
[33] When McArthur Ridge issued this proceeding, its statement of claim stated in simple terms the penalty interest rates and its supporting affidavit offered no explanation of the rationale for the margin of 10 per cent for default. McArthur Ridge did not, with its initial summary judgment documents, file any evidence specifically dealing with the penalty interest rate.
[34] In filing his opposition, Mr Schulz took the point as to the default rate being a true penalty. He ultimately supported that notice of opposition with the evidence of a person with financial consultancy expertise, Alister Bull. Mr Bull noted the additional 10 per cent penalty rate as being a standard term of SCF’s (in fact strictly speaking, Southland Finance’s) loan documentation. Mr Bull then gave evidence as to interest rate factors in the first half of 2008 and interest rate trends. He described
the 15 per cent rate of ordinary interest as providing something of a buffer in terms of SCF’s costs of funds. In his experience, penalty rates at 10 per cent were at the higher end of penalty rates. The 10 per cent penalty rate also needed to be seen in the context of SCF’s place in the lending market at the time which Mr Bull described as a “premier second tier lender” with a very high credit rating in the first half of
2008. His evidence was that SCF was perceived as being close to trading bank status. He viewed the 10 per cent penalty as a very high penalty rate for such a lender. He went on to depose that in March and May 2008, when the first and second loans were made, the world economic outlook was cooling significantly so that SCF’s costs of funds would have been trending down in the twelve months afterwards. It was his view that SCF’s continuing to receive simply the basic rate during that period would see SCF adequately compensated for not having those funds repaid on the due date. In conclusion, he described SCF as having made “an excellent margin on their cost of funds”.
[35] McArthur Ridge did not, with its initial summary judgment document, file any evidence specifically dealing with the penalty interest rate. When Mr Schulz’s notice of opposition raised the issue, McArthur Ridge then filed an affidavit of Mr McCosh in which he stated –
It is standard practice for SCF to have the default interest rate as a figure which is 10% above the normal interest rate.
In my experience in the banking and finance industry I believe that the default interest rate set out in the Credit Facilities is consistent with the default interest rate charged by other finance companies and banking institutions.
[36] Mr Lester, for Mr Schulz, accepted that as a matter of law there is nothing inherently wrong with a default interest provision. He submitted that the usual test in relation to clauses which deal with default prospectively is to examine whether the default rate represents a genuine pre-estimate of loss. For his part, Mr Shiels suggested the more modern approach is to place the examination of penalty clauses, as the Court of Appeal did in Amaltal Corporation Ltd v Maruha (NZ) Corporation
Ltd,[5] in a public policy setting with the Court considering relief from oppression or
unconscionable behaviour by a contracting party. For present purposes (in a summary judgment context), it would likely matter little whether one adopted either approach or both – if a factual foundation exists for the defendant’s argument it is likely that it could be accommodated within either legal approach.
[37] Mr Lester submitted that when the penalty interest clause in these two contracts is placed in the context of a market of falling interest rates (as deposed by Mr Bull), then one need for a penalty rate (namely that the lender is locked in in the event of a rising market) is neutralised. Mr Lester submitted that that leaves the lender potentially with legitimate concerns as to continuing expenses such as administration fees and legal fees. However under these two contracts, legal fees were recoverable in addition to the penalty interest rate. Mr Lester submitted that administration fees were also additionally recoverable – that proposition is less clear as the particular clauses Mr Lester referred to in the two contracts do not appear to unequivocally support such recovery. What Mr Lester was entitled to emphasise was that McArthur Ridge as plaintiff had elected to give no evidence as to the sort of expenses and losses which might have been taken into account when the contracts were entered into. A 10 per cent margin (that is 25 per cent per annum interest rather than 15 per cent), without some evidential basis as to what the additional percentage might cover, is against the background of Mr Bull’s evidence arguably high.
[38] The absolute value of the penalty interest is illustrated in this case by calculations completed by Mr Sissons (and unchallenged) in relation to penalty interest charged by McArthur Ridge on the first contract. Mr Sissons’s calculations indicate that the penalty interest charged by McArthur Ridge accounted for all but
$225,158.00 of the claim on the first contract. In other words, some $586,729.22 represented penalty interest. (These sums are in addition to the $358,795.00 balance on the second loan, which includes no penalty interest).
[39] Mr Shiels submitted that the penalty interest calculation of the first contract should not be struck down as a true penalty. Put another way, he submitted that it should not be considered oppressive or unconscionable. He referred to six particular factors –
Mr Schulz, on his own evidence was a
multi-millionaire company director.
The default interest rate was standard for this lender.
It is in the range of default interest rates for New
Zealand financiers. 
Mr Schulz and COVL had financial
advisors who arranged the loans. 
The signatures
for Mr Schulz and COVL were witnessed by lawyers.
No circumstances other than the default interest rate were
pointed to by
Mr Schulz as being oppressive.
[40] Mr Shiels referred to the provisions in relation to penalty rates set out in s 40
Credit Contracts Act 1981. Mr Shiels referred to decisions of this Court relating to allegations of oppression under the Credit Contracts Act. They each illustrate examinations of allegations of oppression on their particular facts.
[41] Mr Shiels also challenged whether Mr Bull could truly be regarded as an independent expert witness. Until 2005, Mr Bull had been involved in the Taurus Group in Christchurch which arranged for COVL and Mr Schulz the loans which are the subject of this litigation. But while Mr Shiels might wish to explore in cross- examination at a trial the possibility of some bias, Mr Bull’s prior involvement at Taurus would not of itself lead the Court to refuse to accept Mr Bull’s evidence. Mr Shiels went on to make submissions as to areas in which Mr Bull’s evidence was relatively general. To some extent that criticism is justified.
[42] Standing back, the reality is that it was SCF which was best placed to know and to give evidence as to precisely what factors were being taken into account through 2005 when the 10 per cent penalty margin was stipulated. What Mr Bull’s evidence did was to point to factors which might normally work in favour of increasing the default margin (such as a market of increasing interest rates or a loan with particular expenses likely to be incurred) which may be negated or are not in
evidence in this case. Although Mr McCosh (the manager acting on behalf of the receivers for SCF) chose to give evidence as to SCF’s standard practice and as to his experience of rates in the banking and finance industries, he did not give any evidence of factors which influenced SCF’s stipulation of a 10 per cent rate as against any other rate. As Mr Lester suggested, the adoption by Southland Finance and SCF of a standard 10 per cent rate for an extended period may at least arguably indicate the rate adopted was not a rate in which the lender was genuinely pre- estimating its damages on each contract it entered.
[43] Mr Lester initially took a further point in relation to the penalty interest, suggesting that it could not be treated as owing on this proceeding as it had not been demanded by written notice. That argument fell away when Mr Shiels identified in his submissions the contractual provision which makes it clear that the penalty interest rate operated and the penalty interest was owing since default occurred. The demand was the step which then made the penalty interest “payable” or due.
[44] Mr Schulz’s complaint as to the interest rate does not stand alone as a ground of opposition. It is to be considered alongside the issues relating to the mortgagee sale process to which I now come.
Mr Schulz’s cross-claim in relation to alleged breach of SCF’s duties as
mortgagee
[45] Mr Schulz invokes the duty which SCF owed to COVL and to Mr Schulz as
guarantor when exercising its power as mortgagee to sell COVL’s property.
[46] SCF owed a duty of reasonable care to COVL and to Mr Schulz to obtain the best price reasonably obtainable as at the time of sale: s 176 Property Law Act 2007.
[47] Mr Schulz has the same remedies against McArthur Ridge, as SCF’s
assignee, as he had against SCF: s 11 Contractual Remedies Act 1979.
[48] Following Mr Schulz’s receipt of a demand from SCF in May 2011, Mr Lester wrote to SCF’s solicitors setting out a number of concerns including this as to the mortgagee sale process –
Further, my client has spoken to the party who purchased the winery which was subject to SCF’s charge and was sold by the Receiver – although I have seen the signatures of directors of SCF on the Agreement for Sale & Purchase. That purchaser has advised my client that the purchase was foisted upon him by SCF against his will and it appears little marketing or promotion of the property was undertaken. It seems there may have been a brief tender process over Christmas/New Year 2008/2009 – no suggestive [sic] of proper commercial marketing.
[49] Mr Lester invited SCF’s solicitors to work through these issues by
correspondence rather than through pleadings.
[50] SCF’s solicitors and subsequently McArthur Ridge’s solicitors do not appear to have subsequently engaged by correspondence in relation to the concerns raised as to the mortgagee sale process. Mr Lester, in August 2011, had provided to McArthur Ridge’s solicitors a fresh copy of his May correspondence so as to give those solicitors “the flavour of the matters in issue”.
[51] When this proceeding was issued later that month (on 25 August 2011) McArthur Ridge did not in its statement of claim refer in any way to the mortgagee sale. The affidavit of Peter Taylor of McArthur Ridge verifying the statement of claim did not provide any narrative comment on the mortgagee sale process. His affidavit exhibited the Receivers’ Fourth and Final Report on the COVL receivership which did refer to the fact that the receivers worked in conjunction with SCF who as mortgagee sold the land and buildings (for $1,700,000). What Mr Taylor’s evidence did not do was speak to the process of the sale or the notices given in relation to the sale.
[52] Mr Schulz then filed his notice of opposition identifying the mortgagee sale process as the third ground of opposition (see above [19]).
[53] Mr Schulz filed an affidavit in opposition. Mr Schulz’s affidavit identifies the following particular events –
19 September 2008 – Mr Schulz notified of
receivership
Third week of December 2008 – receivers advertise the property and
business (contract winery) for sale by tender
(Undefined date) – Schulz’s interests
submit a conditional tender of
$4,800,000 (the mortgage redemption value)
16 January 2009 – tenders close
May 2009 – receivers enter contract to sell business
to South Island
Vintners Limited for $3,100,000
Same date (May 2009) - SCF enters contract to sell the
(real) property to
South Island Vintners Limited for $1,700,000
[54] Mr Schulz exhibited what he referred to as a September 2008 valuation of the land and buildings of $8,400,000 (which had been addressed to Southland Finance by Ford Baker Valuation Limited).
[55] Mr Schulz said that he understood that a valuation on a “fire-sale” basis had been completed around January 2011 and that it was understood that this was in the vicinity of $6,300,000 - $6,700,000.
[56] In the more detailed grounds provided within his notice of opposition, Mr
Schulz said this in relation to the mortgagee sale –
South Canterbury Finance Limited (In Receivership), when it did sell the secured assets, sold them to an existing client of South Canterbury Finance Limited, without further advertising and having provided 100% of the purchase price by way of finance. Had the availability of vendor finance to a substantial or full extent been part of the marketing for the assets, then a substantial premium over the price realised would have been obtained.
The plaintiff has not in their evidence dealt with the matters required to be canvassed in an application of this nature, as set out in Westpac New Zealand Limited v Cooper, High Court Auckland, CIV-2009-404-000990.
[57] In his affidavit, Mr Schulz referred to the purchase by South Island Vintners
Limited –
On Wednesday, 27 April 2011 at approximately 6.00 pm I met with Mr Ant Moore the Director of SIVL regarding matters associated with the winery. This meeting took place in the Golden Gate Lodge in Cromwell.
At that meeting Mr Moore informed me that SCFL had fully funded his interest into the purchase of the Ripponvale Winery and also advanced him a further sum for working capital in excess of M$1.0.
Confirmation that SCFL had advanced monies to SIVL is shown on the attached historical search copy of Identifier 255217 searched on 29
September 2011 (page 28a). This is shown as Mortgage 8354208.2 and was
registered on 30 November 2009 which is generally consistent with the Sale
& Purchase Agreement. Mr Moore also informed me that he was put under duress to purchase the property.
I was extremely surprised to hear Mr Moore convey that information to me and he confirmed my question to him that in fact SCFL had lent him 125% of the purchase price.
[58] Faced with the grounds of opposition and evidence filed by Mr Schulz, McArthur Ridge moved to amend its statement of claim and to file additional evidence. The summary judgment procedure became increasingly irregular as additional documents were filed. Through the cooperation of counsel the parties treated all material as properly before the Court for the summary judgment hearing (subject to evidential issues relating to hearsay) and the Court has proceeded to consider all pleadings and information before it.
[59] The additional evidence from McArthur Ridge came from two witnesses in particular.
[60] First, Mr Taylor filed a further affidavit. In a response to Mr Schulz’s comments as to the comparison between realisation and a 2008 valuation, Mr Taylor said this –
The Defendant comments in his Affidavit on the difference of the sale price realised for the land and an earlier valuation. I am not a valuer, and cannot comment on this in detail. However, I am a businessman and an insurance broker. In late 2008, there was a global financial crisis that was considered by many to be unprecedented since the great depression. Investors withdrew from speculative investments, including development projects. Finance became very difficult to obtain even for conservative investments, let alone past completed developments. Valuations from before the global financial crisis became quite unreliable and out of date.
[61] Secondly, Duncan Fea, one of the receivers, gave evidence of the sale process of the property and other assets. His evidence on this topic was –
As matters progressed it was decided that the Property and the Assets were to be tendered for sale.
The tender period was carried out between December 2008 and 16 January
2009.
We did not appoint a Real Estate Agent to carry out the Tender Process and ran the Tender ourselves. As part of promotion of the Property and Assets we undertook an extensive marketing campaign which included advertising carried out in the Otago Daily Times, the Christchurch Press, the National Business Review, the Sunday Star Times and the New Zealand Herald.
We directly contacted a significant number of parties who we believed may have been interested in the Property and Assets. I attach to this affidavit and mark “F” a list of the parties who were sent a copy of an information memoranda regarding the Property and Assets.
We also provided full information packs to Real Estate agents who made enquiries with respect to the Property and Assets.
The tender period closed after several weeks of advertising and after four months following our appointment as receiver. The marketing of the Property and Assts was carried out publicly and we had significant contact and communications with a wide variety of interested parties.
We also worked with Mr Robin Schulz in regard to his interest to buy back the Property and Assets through his related entity Brassknocker Investments Limited. I attach to this affidavit and mark “G” the Notice of Tender that was submitted by Mr Schulz through Brassknocker Investments Limited during the Tender. The offer was for $4,900,000 on the formal schedule but was recorded as $4,950,000 GST exclusive in the body of the contract. The offer remained conditional on finance and other conditions. Although the offer was accepted by the receiver, Brassknocker Investments Limited did not confirm the contract as unconditional and the contract came to an end.
The Tender process did not result in an unconditional sale and purchase contract and was therefore unsuccessful. We accordingly commenced detailed and lengthy negotiations with those parties who had shown interest in the Property and Assets during the tender process as well as subsequently. This included:
a. Robin Schulz
b. Invest South Limited
c. Peter Taylor and his group d. Ant Moore and his group e. Craggy Range; and
f. Several other parties that had enquired but not submitted tenders
On or around 2 April 2009, Mr Schulz made another offer through Brassknocker Investments Limited that totalled $5,100,000 GST exclusive. This offer was split in two contracts, one being for land and buildings ($2,000,000) and the other for plant ($3,100,000). Robin Schulz was unable to confirm the contract as unconditional. I attach and mark “H” and “I” the two Agreements for Sale and Purchase.
We did not conclude a sale by harvest 2009 so leased the winery to South Island Vintners Limited. As part of their lease arrangement they reserved a right to purchase the Property and Assets at agreed purchase prices. I attach to this affidavit and mark “J” a copy of the Lease of the Property and Assets.
During the leasing period we continued to deal with interested parties.
South Island Vintners Holdings Limited elected to purchase the Property and South Island Vintners Limited elected to purchase the plant and equipment. South Canterbury Finance Limited (which had amalgamated with Southland Finance Limited) was the Vendor as mortgagee of the Property sale.
[62] Upon receipt of what the deponents for McArthur Ridge were now saying, Mr Schulz filed a further affidavit. In relation to what had been said concerning the mortgagee sale and tender process, Mr Schulz added this –
... I was aware that the tender process was underway and was surprised that it was being undertaken over the Christmas New Year period. I recall seeing one of the advertisements placed and confirm that it did not suggest the finance was available at 100% or otherwise, and indeed as I have said Mr Moore was offered more than that.
Submissions for Mr Schulz
[63] Mr Lester commenced this part of his submissions by referring to SCF’s decision to have its mortgagee sale process conducted, as part of the overall disposal of all assets, by the receivers of COVL. As between SCF and Mr Schulz (and leaving aside information which entered the public domain such as advertisements), the detail of what information was held in relation to the mortgagee sale and precisely what steps were taken was within the peculiar knowledge of SCF and its managers of the sale process, namely the receivers. It appears plain from the evidence filed – particularly having regard to Mr McCosh’s evidence – that McArthur Ridge as plaintiff in this proceeding has had the cooperation of SCF in relation to its evidence in the proceeding.
[64] Focussing first on the steps taken by McArthur Ridge (through the mortgagee sale steps taken by SCF, through the receivers), Mr Lester submitted that for the purposes of this summary judgment application, the steps identified by Asher J in Public Trustee v Ottow (above [17]) provide an appropriate benchmark against which to measure whether Mr Schulz has an arguable case that SCF (and thereby McArthur Ridge) were in breach of their duty of reasonable care to obtain the best price reasonably obtainable as at the time of sale.
[65] In Ottow at [31], Asher J stated –
[31] The following steps indicate that a mortgagee has made reasonable efforts to obtain the best reasonably obtainable price:
c) Marketing over a reasonably long period of time.
d) An extensive advertising and promotional campaign. e) A properly conducted auction.
[66] These steps were adopted by Duffy J at [30]b) in Westpac New Zealand Ltd v Cooper as of assistance to the Court on a summary judgment application in reaching a conclusion as to the possibility of prejudice to a mortgagor.
[67] Taking as an example the second step formulated by Asher J (obtaining a valuation report from an experienced valuer as a guide to what could reasonably be expected for the property), Mr Lester submitted that on the authority of Westpac New Zealand Ltd v Cooper at [30] McArthur Ridge was obliged to put before the Court the existence and nature of valuations obtained as part of the sale process. Duffy J in Cooper at [30] (see also [8]), held that such information should in a summary judgment proceeding be contained in the plaintiff’s initial documents.
[68] I consider such an approach to be appropriate for a number of reasons. First, the realisation steps which a creditor takes in reaching its current balance are usually matters peculiarly within the knowledge of the creditor. Through summary judgment regime, the plaintiff is expected to put its case before the Court and the defendant at the start. Secondly, where there is a mortgagee sale it is the taking of the reasonable steps required by s 176 Property Law Act which ensures that the creditor is entitled to recover the full balance of debt after realisation. Put another way, the reasonableness of the steps taken by the creditor are material to its assertion that the debt claimed is owed. Thirdly, a requirement upon the plaintiff to deal with mortgagee sale information in its initial documents is particularly warranted where the plaintiff is put on notice by the defendant that the reasonableness of mortgagee sale steps is or may be challenged.
[69] Mr Lester submitted that if one applies the six step list formulated by Asher J
in Ottow the McArthur Ridge case fails on all points –
(a) It is common ground that a real estate agent was not appointed to market the property;
(b) Mr McCosh (who gave the evidence which represented the knowledge of SCF) and the receivers (through Mr Fea) have remained silent as to whether valuations were obtained.
(c) In response to Mr Schulz’s evidence that advertising did not commence until the third week of December 2008, with tenders closing on 16 January 2009, Mr Fea referred in his evidence to undertaking “an extensive marketing campaign which included advertising carried out in the Otago Daily Times, the Christchurch Press, the National Business Review, the Sunday Star Times and the New Zealand Herald”. Mr Fea refers also to the provision of full information packs to real estate agents who had made enquiries. He refers also to contacting a number of parties. The close of the tender period came after several weeks of advertising. Mr Lester criticised that evidence as lacking in detail and independent verification. He
challenged particularly the reference to “extensive marketing” given that there was no independent evidence as to the manner or timing of the advertising. For instance, there was no evidence of how many advertisements were placed. Mr Lester noted that while Mr Fea had identified a “significant number of parties” who were contacted, the list of contacts produced included (twice) Mr Schulz himself, included two officers of McArthur Ridge itself, and included officers of SCF.
(d) As opposed to an auction, the mortgagee sold through a tender process.
(e) The sale price obtained cannot be reconciled with expert opinion as to value as McArthur Ridge has not produced any evidence that such was obtained by SCF.
[70] Mr Lester then turned to evidence which Mr Schulz gave as to knowledge of valuation aspects and of the mortgagee sale process itself. He referred in particular to Mr Schulz’s “understanding” that a “fire sale” valuation had been completed around January 2011 indicating a valuation of $6,300,000 to $6,700,000 (above [55]). Mr Lester referred also to Mr Schulz’s contact with Mr Moore of South Island Vintners Limited, an existing debtor of SCF which became the purchaser of the property through refinancing with SCF with a loan which exceeded the agreed purchase price. Mr Lester suggested that the sale price of the property was suspiciously close to a figure which represented the COVL loan (penalty aside). Mr Lester submitted that the transaction has an appearance of “arm twisting”, with SCF “cleaning its book” through turning a defaulting loan into a “clean” loan by the readvance. (Much of this evidence of Mr Schulz was subject to challenge by Mr Shiels as constituting inadmissible hearsay, a submission which I will turn to (below [74]). At the level of submission which Mr Lester was first addressing, however, Mr Lester did not need to rely on Mr Schulz’s evidence in terms of proving the truth of what Mr Schulz said he had come to know or understand. Rather, the thrust of Mr Lester’s submission at this point was that Mr Schulz was putting forward his understanding in a way which called for a response from McArthur Ridge given that
much of the relevant information would be within the peculiar knowledge of
McArthur Ridge and/or its assignor.
[71] Mr Lester referred to South Canterbury Finance Limited v Wakefield Mews Ltd, a decision of Associate Judge Christiansen.[6] In that case SCF sued defendant guarantors. His Honour accepted at [7] that –
... the plaintiff must demonstrate upon its summary judgment application that there are no reasonably arguable issues as to the way in which the mortgaged land was sold and accordingly the price achieved.
[72] In relation to evidence in Wakefield Mews of a close association between SCF and the purchaser of the mortgaged property, and some evidence that the advance from SCF to the purchaser was “favourable”, SCF chose not to produce the terms of the arrangement. The Court was asked to draw inferences that the terms were not commercial. Associate Judge Christiansen found –
I think some further investigation accompanied by the process of discovery is needed to assure the Court that the actions of [SCF] have been responsible throughout. This is a summary judgment application and I would feel uncertain about acting robustly to grant judgment at this time.
[73] Finally, Mr Lester submitted that the Court was entitled to draw an inference as to SCF’s view of the realistic value of the McArthur Ridge loans through the fact that debts which were properly to be assessed as standing at $1,170,661.19 as at 12
July 2011 were on 12 July 2011 assigned to the plaintiff in this case for $30,000 together with a share of any recovery up to a further $70,000.
Submissions for McArthur Ridge
[74] Mr Shiels began his response on the mortgagee sale issues with detailed submissions in relation to a number of passages in the affidavits filed for Mr Schulz. He submitted, correctly, that some of Mr Schulz’s evidence appeared to do no more than set out Mr Schulz’s “understanding”. He submitted, given the exclusory
provisions as to hearsay in s 17 Evidence Act 2006 that offending passages in Mr
Schulz’s evidence could not be brought within the categories of admissible hearsay
under s 18 of the Evidence Act.
[75] Mr Shiels referred also to s 20 of the Evidence Act which renders hearsay evidence admissible in civil proceedings to the extent that the applicable rules of Court require or permit a statement of that kind to made in an affidavit. Rule 7.30
High Court Rules is such a rule, permitting a Judge to accept statements of belief in an affidavit if (amongst other criteria) it is in the interests of justice. The decision of Giles J in Ports of Auckland Limited v The Ship “Raumanga” is authority for the proposition that the rules of evidence (including as to hearsay) should be strictly observed in relation to summary judgments, as a summary judgment application, although interlocutory, is a substantive procedure.[7] (Although the Ports of Auckland case was decided before the Evidence Act 2006, the principles stated are of continuing relevance: see, for instance, Pulman v Orix New Zealand Ltd at [34] and Cooper v Reid at [36].)[8]
[76] Turning to the substance of the mortgagee sale process, Mr Shiels submitted that there was no evidential basis for Mr Schulz’s allegation that SCF had breached its duty of reasonable care in relation to the power of sale.
[77] Mr Shiels submitted that the evidence given by Mr Fea amounted to a detailed description of the steps taken by the receivers on behalf of the mortgagee. He noted that no factual challenge had been made to Mr Fea’s description of the process.
[78] Picking up on his submissions in relation to the hearsay aspects of Mr
Schulz’s case, Mr Shiels noted in particular –
Mr Schulz had referred to the period of advertising.
Mr Schulz’s statement that “the Receiver
subsequently did not conduct the sale to maximise the value of the
property” is a bare opinion
expressed without reference to its justification, and not even referring
clearly to the advertising period.
The closest Mr Schulz came to identifying a particular
basis for the
allegation of breach of duty was Mr Schulz’s reference to the tender
being undertaken over the Christmas-New Year period.
The production of the 12 May 2011 letter from counsel for
Mr Schulz to SCF’s solicitors (above [48]) in which Mr Lester (not
Mr
Schulz) purported to record a conversation between Mr Schulz and Mr Moore (of
South Island Vintners Limited). Mr Shiels submitted
that Mr Schulz’s
affidavit evidence did not verify what Mr Lester had recorded as Mr Schulz
simply deposed that the letter
–
touched on my concerns about the sale process.
Mr Shiels submitted that the only evidence capable of
suggesting any loss caused by the alleged breach of duty lay in a valuation
dated 4 September
2008 exhibited by Mr Schulz. Mr Shiels suggested, correctly, that when one works through the detail of that valuation it is not possible to identify how recent improvements to the property have altered values. To the extent that the report identified a valuation of $8,400,000 it was clearly stated in the report that numerous assumptions were made as to the state of the market and cash flow and that the report had been compiled on the basis of advice from COVL’s directors. The total valuation also included a significant element for an item described as “site goodwill”, the nature of which is not identified. Mr Shiels noted that to the extent that the report identified an element of valuation for land ($2,770,000), it was that
land which SCF was selling.
Mr Shiels submitted that even if the Court were to attach
some weight to the $2,770,000 valuation, Mr Schulz had not tenably pointed
to
evidence of negligence in a sale at $1,700,000 (61 per cent of the valuation
report figure), given that the sales were occurring
after the collapse
of the COVL business and in the middle of the Global Financial Crisis.
Mr Shiels submitted that Mr Schulz’s statement
that he had an
understanding that a valuation was completed on a “fire sale” basis in
January 2011 was rank hearsay.
To the extent that Mr Schulz relied on (hearsay)
suggestions that South Island Vintners Limited had been 100 per cent financed
by
SCF, Mr Shiels rhetorically asked “so what?”. SCF was under no
duty to offer financial assistance to all potential
purchasers. There was
nothing to suggest that South Island Vintners Limited had obtained finance on
anything other than a commercial
basis. Mr Shiels submitted that the manner in
which South Island Vintners Limited had financed its purchase
was irrelevant.
Mr Shiels summarised his submissions with the
proposition that Mr Schulz’s affidavit evidence was totally devoid
of
any suggestion of any reasonable thing SCF should have done which it did not do
or anything which it did which was unreasonable.
Mr Shiels submitted there was
no
independent evidence even suggesting a breach of duty.
Discussion
[79] Mr Shiels’s characterisation of significant portions of Mr Schulz’s evidence as inadmissible hearsay was well-grounded. To the extent that the Court may have been implicitly invited to accept such statements from Mr Schulz as evidence of the truth of their contents I reject the evidence. It fails to meet the requirements for admissibility under s 18 of the Evidence Act. It generally fails to clearly provide the grounds for the belief as required for admission under r 7.3 under High Court Rules. It is provided in the context of a summary judgment application where the Court must be slow, if willing at all, to admit evidence of such a substantive nature. Finally, Mr Schulz has not demonstrated that it is in the interests of justice (the only relevant criterion under r 7.30(1)) that I should accept Mr Schulz’s statements of belief.
[80] The decision not to accept Mr Schulz’s hearsay statements as evidence of the truth of their contents does not leave them without some relevance in a summary judgment context. The authorities establish, as Mr Shiels emphasised, that in assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation. But any consideration of what material on the part of a defendant is adequate needs to take into account the extent to which information on the relevant issue is on the one hand available to the defendant or on the other hand within the peculiar knowledge of the plaintiff or those associated with it. The greater the extent of material within the peculiar knowledge of a plaintiff, the greater the need for a Court to recognise the limits of what a defendant can realistically be expected to document and point to. In such circumstances the second-hand information which a defendant obtains serves a purpose not necessarily of evidence of the truth of its contents but rather of explaining the origin and bona fides of the defendant’s concerns on a particular issue. When such information is raised the defendant is not so much saying to the plaintiff “this information is true and I have a defence” but, if the core information is within the peculiar knowledge of the plaintiff, is instead to say to the plaintiff, “this information has given me these concerns – from the information you hold, please explain whether what I have been told or inferred is right or wrong”.
[81] Against this background I return to the six steps identified by Asher J in Ottow as an aid to considering whether McArthur Ridge has satisfied me that Mr Schulz has no arguable defence. Mr Schulz would have an arguable defence at least as to quantum if it is reasonably arguable that McArthur Ridge breached its s 176 duty in such a way as may have arguably resulted in a price for the property which was less than reasonably obtainable at the time of sale.
Appointment of a reputable real estate agent to market the property
[82] The appointment of a reputable real estate agent to market the property will be evidence of some care. In relation to COVL’s assets, there was clearly potential for commercial benefit if all assets (the land, the chattels and the business itself) were marketed at the same time and not split up for sale. Mr Fea’s evidence is that, against this background, the receivers did not appoint a real estate agent to carry out
a tender process but ran the tender themselves. The decision to tender the assets together was commercially logical, carrying as it did the ability to separate out the items if prices suggested that. What Mr Fea does not claim in evidence is any particular experience of the receivers in selling an asset such as this comprising the land, plant and business, of a contract winery operation in Central Otago. When it came to the step of selecting a suitably qualified agent for sale, Mr Fea’s evidence appears to be that SCF accepted the receivers’ view that they should run the sale process themselves. To the extent that McArthur Ridge has then provided no evidence as to the particular expertise of these two receivers in such an exercise, Mr Schulz is entitled to argue that McArthur Ridge leaves something of a question mark over the expertise of those who ran the tender in this case. Some assumption of experience and expertise might be drawn from the fact that Mr Fea and his partner, both from Queenstown, had been appointed receivers of COVL in the first place but the evidence discloses little more about them than that. That said, if this aspect of the evidence were the only matter of concern it is unlikely that it would alter the outcome of this summary judgment application – as it is, it stands as a factor to be considered in relation to other steps associated with the mortgagee sale.
A valuation report from an experienced valuer
[83] The failure by McArthur Ridge to provide any evidence as to SCF’s obtaining of a valuation report or as to the content of such a report, is perhaps the oddest feature of this case. As the judgment of Asher J in Ottow indicates, the obtaining of a report indicates that the mortgagor and its advisors were appropriately seeking guidance as to what might be a reasonably obtainable price. In the context of this step, I consider that the extent of Mr Shiels’ attack on the hearsay aspects of Mr Schulz’s evidence, including in relation to valuations, ultimately missed the point
– Mr Schulz had found out (albeit through hearsay) some information as to what valuations may have existed. The entities best placed to give direct evidence as to what valuations were in fact obtained were McArthur Ridge, SCF and the receivers. Their failure to provide that information is unexplained. A number of inferences might arise. One inference is that the receivers, who ran the sale, did not in fact commission a valuation. A second inference is that they obtained a valuation but did not wish to put its contents before the Court for scrutiny.
[84] As it is, in relation to this second step in the Ottow formulation, McArthur Ridge as plaintiff has not provided evidence that SCF obtained a valuation report from an experienced valuer as a guide to what could be reasonably be expected from the sale of the property.
Marketing over a reasonably long period
[85] SCF had been on notice from the time of Mr Lester’s 12 May 2011 letter (above [48]) that Mr Schulz understood that there had been only a brief tender process over Christmas/New Year 2008/2009 (beginning in the third week of December), and that it was his view that this was not suggestive of proper commercial marketing. Neither SCF nor McArthur Ridge (after it took the assignment) chose to detail in correspondence what marketing had occurred. McArthur Ridge equally did not do so in its original documents filed in this proceeding. In response to Mr Schulz’s evidence that he was surprised that the marketing was undertaken over the Christmas/New Year period, McArthur Ridge finally filed evidence which referred to the marketing. Mr Fea’s affidavit disclosed that the tender period was carried out between December 2008 (date not specified) and 16 January 2009. This appears to confirm Mr Schulz’s observations and evidence. Mr Fea goes on to say that as part of the promotion there was “an extensive marketing campaign” which included advertisements in five newspapers. Detail of what Mr Fea means by “an extensive marketing campaign” is not provided other than by the reference to five newspapers. Examples of the advertising are not provided. Mr Fea says also that information packs were provided to real estate agents – again, examples of the information packs are not provided and nor are detail of how many real estate agents. Mr Fea also refers to the contact that the receivers had with a “significant number of parties” who they believed might be interested in the assets – there is no explanation of the nature of the contact or discussions and, furthermore, Mr Lester has correctly pointed out aspects of the list which appear to indicate that it was a record that included contact with people who were not themselves potential purchasers.
[86] Against this background, Mr Schulz is entitled to say that, at least arguably, McArthur Ridge has not produced evidence of marketing over a reasonably long
period of time. The period of what seems to have been at most a few weeks of advertising was intersected by the Christmas vacation. The tender period on Mr Fea’s evidence closed on 16 January and it is possible that the advertising ceased some time before that. The implication is that the advertising very closely coincided with the core Christmas vacation period of 2008/2009.
[87] I have taken account of Mr Shiels’ criticism, in relation to Mr Schulz’s opposition, that there is no expert opinion from a “property lawyer, banker, liquidator, etc” that SCF had breached any duty it had. What is reasonable practice might have been the subject of expert evidence across a range of disciplines such as those identified by Mr Shiels or indeed from a person with expertise in the real estate market. This remains, however, not a trial but an interlocutory summary judgment application. With reference to the third step in Ottow, Mr Schulz had raised the length of the marketing campaign as a matter of concern well before the proceeding was issued. The concern was reasonably raised given that on any objective approach the marketing campaign appears to have been relatively short, particularly when one has regard to the intervening vacation. The evidence which McArthur Ridge has chosen to give in response to Mr Schulz’s opposition evidence is not in such detail as to properly tell the Court exactly what advertising and other promotion was undertaken. The Court is left with, at least, an arguable proposition that marketing did not occur over a reasonably long period.
An extensive advertising and promotional campaign
[88] I have discussed the extent of the campaign, as well as the length of the campaign, under the previous heading.
A properly conducted auction
[89] Although Mr Lester correctly identified this as another of the Ottow steps which was not taken, there was a compelling commercial case for the joint marketing of assets which occurred (land, plant and business) through the receivers leading to an attempted sale by tender. Mr Lester did not seek to further develop this aspect in his submissions and I would not find on the evidence filed that the vendors’
preference for sale by tender over sale by auction indicates any evidence of lack of care in this case.
A sale price that, given all the circumstances, can be reconciled with expert opinion as to value
[90] The failure of McArthur Ridge to provide any information as to valuation evidence which was obtained by it, SCF or the receivers has meant that there can be no reconciliation between the price obtained for the land and any valuation obtained to guide the receivers in the process. I do not overlook the fact that Mr Schulz himself did not file an affidavit from a valuer. Mr Schulz cannot point to a disparity between the price obtained and evidence of value given directly on this application. Mr Schulz did exhibit the September 2008 valuation of the business (including the land and buildings). There are difficulties in drawing any reliable conclusions as to the market value of the land at that point given the difficulties with the report identified by Mr Shiels. The Court is left with no reliable valuation evidence focussed on value at the time of sale.
[91] In this case, however, Mr Schulz’s failure to produce such evidence does not determine whether there is an arguable defence. This is not a case where the defendant bases his allegations of negligence primarily on a difference between valuation and realisation. Mr Schulz’s case from the outset has been primarily based on such features of SCF’s conduct as the brevity and timing of marketing, and its apparent lack of valuation advice. In a summary judgment context, the consequence of such breach of care by the mortgagor can be put on the basis that the conduct was likely to result in a loss of value on sale.
The six steps – drawn together
[92] Drawing the criticisms of the SCF sale process together, there are (combined with the failure by McArthur Ridge to provide to Mr Schulz and to the Court detailed information as to the sale process which was within the peculiar knowledge of McArthur Ridge and/or its assignor) sufficient features of the sale process in this
case to give rise to an arguable case that SCF failed to exercise its duty of reasonable care to obtain the best price reasonably obtainable at the time of sale.
[93] Moving outside the steps identified by Asher J in Ottow, a feature of this case lies in the unknown detail of the negotiations and arrangements and sale entered into with South Island Vintners Limited. Whether or not anything which Mr Schulz deposes was said to him by Mr Moore was correct, Mr Schulz’s pre-litigation complaint to SCF identified his concern that SCF, in selling the property to South Island Vintners Limited, may have been influenced in its conduct of the sale by a desire to put the South Island Vintners Limited existing loans onto a sounder footing. The land transfer record is that SCF immediately upon its purchase by South Island Vintners Limited took security over the property. I view the possibility that South Island Vintners Limited may have been offered 100 per cent financing by SCF, while such an offer may not have been made to other potential purchasers, as a red herring. What would be of relevance at a trial is any evidence indicating that in the discussions and arrangements between SCF, the receivers and Mr Moore there was anything to indicate that the decision to sell to South Island Vintners Limited was influenced in part by the benefits to SCF of putting the South Island Vintners Limited debt on a new footing with new security. The content and nature of the negotiations with South Island Vintners Limited were within the peculiar knowledge of the receivers and/or McArthur Ridge. Mr Schulz’s one ground of opposition related to the sale to South Island Vintners Limited as an existing client of SCF, without further advertising and on provision of 100 per cent of the purchase price by way of finance. McArthur Ridge has not provided evidence in response to that ground. Mr Taylor, of McArthur Ridge, filed a further affidavit after receipt of Mr Schulz’s opposition but did not deal with this point. Nor did Mr Fea. Nor did Mr McCosh.
[94] Mr Shiels invited the Court, upon the supposition that South Island Vintners Limited may have been funded 100 per cent of the purchase price, to deal with that aspect as irrelevant given that the mortgagee was not obliged to offer finance to every potential purchaser. Mr Shiels submitted that in fact SCF’s offering finance to South Island Vintners Limited was of benefit to COVL in the mortgage sale process. I accept the thrust of Mr Shiels’ submissions on that aspect.
[95] Mr Shiels went on to submit that there is nothing to suggest that any finance made available to South Island Vintners Limited was other than on a commercial basis. There was nothing to suggest that COVL’s interests had in any way been sacrificed. On a strictly evidentiary approach, Mr Shiels’ submission may be justified. Mr Schulz cannot identify a particular document or communication which evidences a sacrificing of COVL’s interests. But the circumstances lend themselves to at least a possibility that SCF’s interests have been preferred to the detriment of COVL. This is, again, an area where the information as to discussion and communication was peculiarly within the knowledge of McArthur Ridge or its assignor. It is a subject on which discovery of documents may bring to light relevant discussions or negotiations. The Court’s understanding in an interlocutory context has not been assisted by McArthur Ridge’s failure to directly explain what the deal was with South Island Vintners Limited.
Conclusion
[96] Mr Lester has correctly conceded that Mr Schulz has a liability of some level. There must at least be judgment for liability.
[97] McArthur Ridge has not satisfied me that Mr Schulz has no defence as to the quantum of the claim. This is for two reasons:
It has not satisfied me that Mr Schulz has no arguable case
that McArthur Ridge has failed to exercise its duty of care to Mr Schulz
to
obtain the best price reasonably obtainable for the property at the time of the
sale. Mr Schulz has an arguable case that the
extent of the arguable breach
of
McArthur Ridge’s duty is likely to have caused him damage.
McArthur Ridge has not satisfied me that its penalty
interest rate does
definitely not contain a true penalty element.
[98] Any decision of the Court to give summary judgment involves an exercise of the Court’s discretion. There is indisputably information relevant to the sale process which would have been at least originally within the peculiar knowledge of SCF
and/or its receivers. There will also be information held by or known to the employees of Southern Finance and SCF as to how its penalty interest rate was struck. Some of that information may have actually passed into the knowledge of McArthur Ridge or at least been obtainable by McArthur Ridge following the assignment of SCF’s interests to McArthur Ridge. McArthur Ridge has either elected or been unable to provide to the Court information on some matters in areas which either Mr Schulz had challenged or on which further information might reasonably have been expected. Even had my consideration of the evidence not led me to the conclusion that the plaintiff ’s case had not been established to the required level of proof, I would have been left uncomfortable in entering judgment for quantum in this case. I am not satisfied that the full, relevant story as known to McArthur Ridge or its assignor has been told. That concern is reinforced by the failure of McArthur Ridge to give direct evidence on a number of the areas as discussed in this judgment.
Orders
[99] I order –
(a) There is summary judgment for the plaintiff against the defendant on the issue of liability.
(b) I dismiss the application for summary judgment so far as it relates to quantum.
(c) I direct a trial of the issue of amount.
(d) Costs are reserved.
Associate Judge Osborne
Solicitors:
Van Aart Sycamore Lawyers Ltd, PO Box 5589, Dunedin
Counsel: Mr T J Shiels, PO Box 5029, Dunedin
Cordner Hill Law, PO Box 25104,Christchurch
Counsel: Mr D M Lester, PO Box 9344, Christchurch 8149
[1] Haines v Carter [2001] 2 NZLR 167 at 187.
[2] Westpac New
Zealand Ltd v Cooper HC Auckland CIV-2009-404-000990, 29 January
2010.
[3]
Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR
54.
[4]
Public Trustee v Ottow [2009] NZHC 2904; (2010) 10 NZCPR 879.
[5] Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 614 at [56] to [59].
[6] South Canterbury Finance Limited v Wakefield Mews Ltd HC Christchurch CIV-2009-409-
001553, 15 December 2009.
[7] Ports of Auckland Limited v The Ship “Raumanga” (1998) 12 PRNZ 84.
[8] Pulman v Orix New Zealand Ltd [2008] NZHC 218; (2008) 18 PRNZ 955; Cooper v Reid [2009] NZHC 2411; (2009) 20 PRNZ 352.
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