Columbia Marketing Limited v International Book Club Limited [2012] NZHC 678 (5 April 2012)

Last Updated: 5 July 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-007103 [2012] NZHC 678

BETWEEN COLUMBIA MARKETING LIMITED Plaintiff

AND INTERNATIONAL BOOK CLUB LIMITED

First Defendant

AND S HENRY

Second Defendant

Hearing: 2 March 2012 (Supplementary submissions received 9 and 16 March

2012)

Appearances: J Carlyon for Plaintiff

S M Dwight for Defendants

Judgment: 5 April 2012

_{(RESERVED) JUDGMENT OF ANDREWS J}

This judgment is delivered by me on 5 April 2012 at 2:30pm pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Solicitors: Meredith Connell, PO Box 2213, Shortland Street, Auckland 1140 (Plaintiff)

[e-mail]

Cavell Leitch Pringle & Boyle, PO Box 799, Christchurch 8011 (Defendants)

[e-mail]

COLUMBIA MARKETING LTD V INTERNATIONAL BOOK CLUB LTD HC AK CIV 2011-404-007103 [5

April 2012]

Introduction

[1] On 4 November 2011 the plaintiff (Columbia) issued proceedings against the first defendant (IBC) and the second defendant (Mr Henry) claiming £102, 920.55; that being the amount alleged to be owed by IBC and Mr Henry (as guarantor) to Columbia for books supplied by Columbia to IBC. At the same time, Columbia applied for summary judgment against both defendants on the grounds that neither IBC nor Mr Henry has an arguable defence to Columbia’s claims.

[2] The application for summary judgment is opposed by both IBC and Mr

Henry.

Background

[3] Columbia is a wholesale supplier of “remainder” books, and is based in the United Kingdom. In May 2010 IBC placed an order with Columbia for a consignment of books (“the first order”). IBC paid for the first order on 20 May

2010. IBC placed a second order with Columbia in August 2010 (“the second order”). This was for a consignment of books to the value of £102,920.55.

[4] The first order arrived in New Zealand in September 2010 and was

distributed to IBC’s stores. The second order arrived in New Zealand on 25

November 2010. IBC did not pay for the second order because of issues it had raised with Columbia concerning the first order as to the delivery of incorrect stock (that is, books which had not been ordered) and damaged stock.

[5] In December 2010, Columbia served a statutory demand on IBC, claiming to be owed £102,920.55 “for payments using the credit facility” of Columbia. IBC’s solicitors wrote to Columbia on 22 December 2010, to the effect that the statutory demand was defective in a number of respects: despite being delivered to various premises, the statutory demand had not been served on IBC’s registered office, nor in accordance with the requirements of the Companies Act 1993; IBC’s name was incorrectly recorded on the demand; no invoice had been received for the amount said to be owed; and IBC had no knowledge of any “credit facility”. The solicitors also noted that they were instructed that IBC did not owe any amount to Columbia

and that it was inappropriate for Columbia to issue a statutory demand given that it had previously been notified of the dispute.

[6] On 18 January 2011 Mr Croydon (a director of Columbia) met with Mr Henry (manager of IBC) in New Zealand. In its statement of claim Columbia alleged that at that meeting an agreement was reached that Columbia would withdraw its statutory demand, IBC would pay the total sum of the invoices relating to the second order (£102,920.55) in monthly instalments, the final such payment being in December 2011, and Mr Henry would personally guarantee payment of the

invoices.1

[7] There was then an exchange of telephone calls, emails, and letters between Columbia and IBC. These will be referred to in more detail later in this judgment. No payment was made by IBC and, as noted earlier, this proceeding was issued on 4

November 2011.

Columbia’s claim

[8] Columbia’s statement of claim sets out three alternative causes of action. The first cause of action alleges that, pursuant to a personal guarantee given by him, Mr Henry is personally liable to pay the invoices totalling £102,920.55 and has refused to do so. The second cause of action alleges a breach of the settlement agreement (defined as the agreement between Mr Croydon and Mr Henry allegedly entered into at a meeting “on or about 18 January 2011”). The third cause of action alleges that when IBC placed the second order, it agreed to pay Columbia’s invoices, but has failed to do so.

Summary judgment principles

[9] Under r 12.2 of the High Court Rules, the Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim, or to a particular part of any such cause of action.

[10] The Court of Appeal in its judgment in Krukzeiner v Hanover Finance Ltd

summarised the approach to an application for summary judgment by a plaintiff:2

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated. The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.

(Citations omitted.)

IBC and Mr Henry’s opposition

[11] On behalf the defendants, Ms Dwight raised a number of matters which, she submitted, demonstrate that IBC and Mr Henry have an arguable defence. These may be summarised as follows:

(a) There are factual disputes, namely:

(i) whether any agreement was reached on 18 January 2011,

(ii) whether any agreement was reached after 18 January 2011, and

(iii) whether Mr Henry agreed to provide a personal guarantee of payment by IBC;

(b) The document relied on by Columbia for its claim against Mr Henry as guarantor does not meet the requirements of s 27 of the Property Law Act 2007;

(c) The books supplied by Columbia were not those ordered by IBC

and/or were damaged, so as to be unsuitable for sale; and

[12] Ms Dwight further submitted that the application for summary judgment should be dismissed on the grounds that Columbia failed to put all relevant material before the Court, and that the material it did disclose was misleading in a number of respects.

Columbia’s second cause of action: alleged settlement agreement reached on 18

January 2011

[13] Columbia’s second cause of action alleges that IBC is in breach of the alleged

settlement agreement. It is convenient to consider this cause of action first.

[14] In his affidavit in support of Columbia’s application for summary judgment

Mr Croydon said that Columbia shipped the second order of books to IBC in August

2010 and that, as was its usual practice, invoices for that order were shipped with the books. He further said that despite having taken delivery of the books, IBC did not pay the invoices. Mr Croydon said that in December 2010, when Columbia had still not received payment, he prepared a statutory demand and arranged for it to be served on IBC.

[15] In response to the matters raised by IBC’s solicitors in their letter of 22

December 2010, Mr Croydon said that “putting aside technical arguments around the statutory demand”, the solicitors were wrong to say that no debt was owed to Columbia. This was, first, because the invoices had been included with the shipping documents. Even if they had not been included (which he denied), IBC had made the order and knew it was liable to pay. Secondly, Mr Croydon said that Columbia had supplied the books which were ordered, and that the issue of damaged or incorrect stock had only been raised when Columbia sought payment.

[16] As to the meeting on 18 January 2011, Mr Croydon said:

In any event I was in New Zealand on 18 January 2010 [sic] and met with Mr Henry to discuss the [second order] and payment. At the meeting, Mr Henry and I agreed that:

(a) Columbia would withdraw the statutory demand;

(b) IBC would pay the invoices in full in monthly instalments, the final payment being in December 2011; and

(c) Mr Henry would personally guarantee payment of [the second order].

[17] In his affidavit in support of the defendant’s opposition to the application for summary judgment, Mr Henry said that the first order of books arrived in New Zealand in September 2010, after the second order had been placed. No invoices were included with the books. The books were distributed to stores, along with a copy of the first order so that staff could check that the books corresponded with those ordered. Feedback was received from stores that the books did not correspond with the order, and that a number of books were also damaged.

[18] Mr Henry said that he had a number of telephone conversations with Mr Croydon about the issues with the first order of books, and he told Mr Croydon that the books supplied were not what had been ordered, and that there were damaged books. He referred to an email response from Mr Croydon denying that there were discrepancies between what was ordered and what was delivered. Mr Henry pointed out that this response was sent on 17 November 2010, before the second order of books had arrived in New Zealand. Mr Henry said that, given the problems with the books, and the fact that no invoices had been received for the second order, he was “very surprised” when the statutory demand was served.

[19] Mr Gerard Bligh, General Manager of IBC at the time, said in an affidavit in support of the opposition that he, too, had contacted Mr Croydon after the first order of books had arrived, and had informed him that the books were not acceptable. He said that when the second order of books arrived there were similar problems in terms of discrepancies in the titles and quantities ordered, and damaged books. An attempt was made to carry out an audit of the discrepancies but, because there were thousands of books in each order, and a large number of discrepancies, it was “nigh on impossible” to do so. Mr Bligh also said that no invoices were received with the second order of books.

[20] Regarding his meeting with Mr Croydon in January 2011, Mr Henry said that they discussed the problems with the books, and that he told Mr Croydon that IBC would look to make some payments to Columbia. He said that Mr Croydon confirmed to him that the books supplied were not the same as those ordered, and that Columbia’s common practice was to substitute books at its own discretion, without seeking the purchaser’s approval.

[21] Mr Henry denied that he and Mr Croydon had reached any agreement in the terms stated by Mr Croydon. In this respect he referred to an email from Mr Croydon, sent on 21 January 2011, which refers to Mr Croydon expecting to receive a financial proposal from Mr Henry. This is inconsistent with an agreement having been reached on 18 January 2011.

[22] I am satisfied that there is a material conflict of evidence as to what, if anything, was agreed at the meeting on 18 January 2011. With respect to Columbia’s claim that an agreement was reached on 18 January 2011 that the statutory demand would be withdrawn, IBC would pay £102,920.55 in monthly instalments up to 31

December 2011, and Mr Henry would personally guarantee payment, I am satisfied that there is a real question to be tried.

Was an agreement reached after 18 January 2011?

[23] Ms Carlyon acknowledged that the dispute as to what was said and agreed at the meeting on 18 January 2011 could not be resolved in the context of an application for summary judgment. However, she submitted that it was not necessary to do so, because there could be no dispute that correspondence after 18

January 2011 clearly showed that the alleged agreement was, in fact, reached.

[24] Mr Croydon’s evidence was that on 9 February 2011 he sent an email to Mr Henry (via Mr Bligh) to confirm the details of the settlement agreement. That email was as follows:

Dear Simon, further to our telephone conversation on Friday, you were going to confirm that our outstanding debt of $201NZ was going to be repaid by

Bookcity3 with Monthly transfers to be paid by 31st dec [sic] 2011 and that the debt would be subject to a personal guarantee by yourself. On this basis I agreed that we would withdraw the statutory demand and inform HSBC

that we had reached an agreement.

Could you please confirm this position and I will draft a suitable agreement for your approval.

Look forward to hearing from you.

[25] Mr Croydon said that he received the following response from Mr Bligh:

Hi Nick

Thanks for your emails.

Simon is away till tomorrow but he did mention this to me and asked me to write up a letter to the above effect. I will do that today and get it through to you tomorrow.

We did put the $5000 international money transfer through but it appears it never left our account? Possibly due to it being a public holiday here the day following the transaction. I will check this morning and revert.

Gerard.

[26] Mr Croydon said that he then received a letter from Mr Henry, dated 9

February 2011:

As discussed by telephone, subject to you withdrawing the statutory demands, I will personally guarantee payment of your account. Regular monthly payments will be made with the balance being cleared no later than

31 December 2011.

I look forward to confirmation that the statutory demands have been withdrawn.

I look forward to buying more stock off you throughout the year.

[27] Mr Croydon said that on receiving Mr Henry’s letter he telephoned Mr Bligh

and told him that the statutory demand had been withdrawn.

[28] Ms Carlyon submitted that the correspondence set out above makes it clear that an agreement was reached, and that the terms of the agreement were as alleged

_{by Columbia.}

3 It is assumed that “Bookcity” is a trading name of IBC.

[29] Ms Dwight submitted that Columbia failed to disclose all relevant documents concerning the communications between Columbia and IBC and that, when all communications are considered, it is not “clear” that an agreement was reached, or what the terms of any such agreement were.

[30] Mr Henry referred in his affidavit to an email from Mr Croydon, dated 21

January 2011. That email was as follows:

Dear Simon and Gerard, thanks very much for seeing me in Auckland I thought it was most helpful and got us back to a sound business footing. Simon was going to send me a financial proposal based on our meeting and outlined below:

Total debt $211k NZ Less paid 10k

Less allowance for damages

Errors etc 10k Balance due $191k To be paid during next

[?]4 weeks 50k

Monthly over next 10 14k

We also talked about sending you data of our 9000 titles for your online business where we would ship direct to consumer. If this is something you want to pursue let me know.

I look forward to hearing from you shortly.

[31] Mr Henry said that “in the end” he did make an offer to personally guarantee IBC’s payment, but this was subject to Columbia withdrawing the statutory demand. He said this was very important to him, which is why he made it a condition of giving a personal guarantee in his letter of 9 February 2011. He said that when no confirmation was received, he instructed Mr Bligh to write to Columbia on 3 March

2011, as follows, attaching a copy of Mr Henry’s letter of 9 February 2011:

Hi Nick,

As we have had no confirmation from you in regards to the attached letter, we hereby rescind that offer.

The earthquake in Christchurch has shut down our Cashel Street operation. We doubt that we will ever reopen from those premises.

4. The copy of this email on the Court file does not show the period within which this payment was to be made.

Whitcoulls and Borders are slashing their prices to the point where they are selling books for less than we bought them from you. We cannot compete with that.

It is a real struggle, we will make payments when funds become available.

[32] Mr Bligh said that Mr Croydon is not correct to say that he called and said that the statutory demand had been withdrawn. Mr Bligh said that he did not receive any call from Mr Croydon, and did not receive any notification from Mr Croydon, or from anyone else, that the statutory demand was withdrawn.

[33] Ms Dwight submitted that the correspondence shows that there is a real dispute as to what, if anything, was agreed. She pointed to the differences between the terms set out in the emails of 21 January and 9 February 2011, which are not explained:

(a) Amount owing: 21 January email – $NZ 191,000

9 February email – $NZ 201,000

(b) Initial payment: 21 January email – $50,000

9 February email – no initial payment

(c) Monthly instalments: 21 January email – $14,000

9 February email – no specified amount

(d) Personal guarantee: 21 January email – not mentioned

9 February email – personal guarantee referred to

[34] Ms Dwight submitted that it is significant that in the 9 February 2011 email, Mr Croydon asked IBC to “confirm this position” and said that he would “draft a suitable agreement for your approval”. The email of 9 February, therefore, made any agreement subject to contract, and there was no intention to be bound until such

_{time as a formal agreement was signed.}5

5 Citing Carruthers v Whitaker [1975] 2 NZLR 667 (CA).

[35] Ms Dwight also submitted that Mr Henry’s letter of 9 February 2011 did not confirm a settlement agreement reached on 18 January 2011. First, there was no intention to be bound until there was a formal, signed contract. Secondly, Mr Henry’s letter does not on its face accept the terms set out in Mr Croydon’s email of

9 February; rather, it refers to a discussion by telephone. Thirdly, in the light of the differences in terms listed at [33], above, it is entirely uncertain what the “balance” referred to in Mr Henry’s letter is. Fourthly, Mr Henry’s letter is, at best, a conditional offer, clearly subject to withdrawal of the statutory demand and confirmation that that had occurred, and Columbia never communicated acceptance of that offer.

[36] Columbia’s submission that an agreement was reached after 18 January 2011 (in particular in the correspondence of 8 and 9 February 2011) is not what was pleaded. Columbia’s statement of claim alleges that Mr Croydon and Mr Henry reached an agreement “on or about 18 January 2011”, and that this was confirmed by the letter from Mr Henry of 9 February 2011.

[37] I invited counsel to make supplementary submissions on this point. Ms Carlyon submitted that if I were minded to grant summary judgment, then Columbia should be given leave to amend its pleading, so that its claim reflects the agreement which is evidenced (she submitted) by the correspondence of 8 and 9 February 2011. Ms Carlyon submitted that leave ought to be granted on the basis that it would cause no prejudice to the defendants, as Columbia’s case was that a binding and enforceable agreement was recorded in the correspondence of 8 and 9 February

2011, and that position was addressed by the defendants.

[38] Ms Dwight submitted that “the changing nature” of Columbia’s case was an acknowledgement that there are factual disputes between the parties that cannot be resolved on a summary judgment application. She submitted that as this is an application for summary judgment, and as Columbia failed to put all relevant evidence before the Court, leave should not be given to amend the pleading. She said that the defendants would be prejudiced by an amendment as they have not had the opportunity to address the amended claim in their evidence.

[39] Ms Carlyon referred me to cases where leave to amend had been given: Elders Pastoral Ltd v Marr,6 and Elders Pastoral Ltd v Pemberton.7 Both were cases where leave to amend was sought in the course of trial. Ms Dwight referred me to Tip Top Ice Cream Co Ltd v Polarland Ltd, where leave to amend an application for summary judgment during the course of the hearing was declined, principally on the grounds of the prejudice caused to the opposing party (in that case, the defendant).8

[40] I accept Ms Dwight’s submission that the amendments sought fundamentally changed Columbia’s case, but I also accept Ms Carlyon’s submission that the defendants have addressed the question of whether an agreement was reached in the correspondence of 8 and 9 February 2011.

[41] In any event, I have concluded that it is not necessary to decide whether leave should be given to amend the statement of claim. This is because I am satisfied that there is a material conflict of evidence as to what, if anything, was agreed between Columbia and IBC after 18 January 2011. There are significant differences between the terms set out in Columbia’s emails of 21 January and 8 February 2011. There is no evidence as to what was said in a telephone conversation between Mr Croydon and Mr Henry on 4 February 2011 and what, if anything, was agreed. There is no explanation for the differences between the terms set out in the emails of 21 January and 9 February 2011, and there is no explanation as to how the initial claim of

£102,920.55 became either $191,000 or $201,000. Accordingly, there is uncertainty as to what Mr Henry may have agreed to in his letter of 9 February 2011.

[42] I am satisfied that there is a real question to be tried as to Columbia’s assertion that an agreement was reached after 18 January 2011, if leave to amend were given. Accordingly, I decline to grant summary judgment on Columbia’s

_{second cause of action.}

6 _{Elders Pastoral Ltd v Marr [1987] NZCA 18; (1987) 2 PRNZ 383 (CA).}

7 _{Elders Pastoral Ltd v Pemberton (1990) 2 PRNZ 188 (CA).}

8 Tip Top Ice Cream Co Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [31] – [39], per

Associate Judge Faire.

Columbia’s first cause of action: alleged personal guarantee

[43] In its first cause of action, Columbia alleges that, pursuant to the personal guarantee he gave, Mr Henry is personally liable to pay the invoices for the second order of books.

[44] In light of my finding that there is a real question to be tried as to whether any agreement was reached between Columbia and IBC, either on 18 January 2011 or subsequently, it follows that I am satisfied that there is a real question to be tried as to the alleged personal guarantee, which is one of the terms of the alleged agreement.

[45] Further, I am satisfied that there is a real question to be tried as to whether, in fact, Mr Henry made an offer to give a personal guarantee, conditional upon receiving confirmation that the statutory demand was withdrawn, and that the offer could be, and was, rescinded when such confirmation was not received. Given those findings, there is no need to consider Ms Dwight’s submission that there was non- compliance with s 27 of the Property Law Act 2007.

[46] Accordingly, I decline to grant summary judgment on Columbia’s first cause

of action.

Columbia’s third cause of action: alleged non-payment of invoices

[47] Columbia’s third cause of action is based on an allegation that when it placed the second order, IBC agreed to pay Columbia’s invoices, and that it failed to do so.

[48] Ms Dwight submitted that there is a real issue to be tried as to whether IBC received invoices with the second order of books, and as to discrepancies between the books ordered and delivered, and damaged stock. She submitted that IBC has suffered loss as a result of these matters, and has a set-off or counterclaim against Columbia for those losses. She submitted that the third cause of action cannot be resolved in the context of an application for summary judgment.

[49] Ms Carlyon submitted that any issues as to incorrect or damaged stock were resolved by the alleged settlement agreement and were, therefore, irrelevant to the application for summary judgment.

[50] Again, in the light of my finding that there is a real question to be tried as to whether any agreement was reached between Columbia and IBC, it follows that there is also a real question to be tried as to the alleged discrepancies between books ordered and received, and damaged stock. The question whether IBC has a valid set- off or counterclaim cannot be determined on the application for summary judgment.

[51] Accordingly, I decline to grant summary judgment on Columbia’s third cause

of action.

Result

[52] Columbia’s application for summary judgment is dismissed. Costs are reserved. The proceeding is adjourned for mention in an Associate Judge’s

_{Chambers List on the first convenient date after 21 May 2012.}

Andrews J