Drake v Rankin [2013] NZHC 1889 (29 July 2013)

Last Updated: 5 August 2013

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-000420 [2013] NZHC 1889

BETWEEN	CATHERINE MARIE DRAKE and INDEPENDENT TRUST COMPANY (2007) LIMITED Plaintiffs
AND	MATHEW CHARLES RANKIN Defendant

Hearing:	29 July 2013
Counsel:	D G Dewar for Plaintiffs M M van den Bergh for Defendant
Judgment:	29 July 2013

_{JUDGMENT OF COLLINS J}

Introduction

[1] This judgment explains why I have decided to dismiss Mr Rankin’s

application to strike out part of the statement of claim brought against him.

Context

[2] Ms Drake and Independent Trust Company (2007) Ltd are trustees of a family trust called the Millie Trust. The Millie Trust was created on 30 January

2008.

[3] Mr Rankin was a director and a shareholder of a company called Getfunkd Manners Ltd (Getfunkd) which was a hairdressing business in Manners Street, Wellington. The Millie Trust was also a small shareholder of Getfunkd and

_{Ms Drake was formerly a director of that company.}

DRAKE v RANKIN [2013] NZHC 1889 [29 July 2013]

Agreement and a memorandum of terms and conditions of the General Security

Agreement (memorandum).

[5] Mr Rankin guaranteed the advance. However, he says that the terms of the loan provided for Getfunkd to only repay any debt which was outstanding on

7 October 2028.

[6] Getfunkd has ceased trading. The Millie Trust has demanded Mr Rankin now pay all sums it says are outstanding.

[7] The key matters in dispute between the parties are:

(1) Can Mr Rankin be required to repay the outstanding debt before

7 October 2028? If so,

(2) What, if anything, is the amount of the outstanding debt?

Procedural history

[8] The Millie Trust sought summary judgment against Mr Rankin. That application was heard by Associate Judge Christiansen on 25 June 2013. The Associate Judge had before him three affidavits from Ms Drake and two from Mr Rankin. Those affidavits set out many factual disputes between the parties. Summary judgment was declined because the factual issues could not be appropriately resolved in a summary judgment application. Those factual disputes included:

(1) the amount that Mr Rankin had repaid the Millie Trust;

(2) the amount that the Millie Trust had advanced to Getfunkd; and

who is also Ms Drake’s daughter.

Mr Rankin did not at that time submit that the Millie Trust was unable to demand payment of all outstanding interest and principal.

[9] The substantive proceeding is set down for hearing on 13 November 2013. In the meantime Mr Rankin has applied to strike out that part of the statement of claim in which it is said that the “advances to [Getfunkd] were on the basis that they were repayable on demand, and would be guaranteed by [Mr Rankin]”.

Principles governing strike-out

[10] The principles governing a strike-out application are well settled. In the context of this case I may strike out part of the statement of claim if I am satisfied it discloses no reasonably arguable cause of action.1 The strike-out jurisdiction is to be exercised sparingly and only if I am satisfied that the cause of action in question is “clearly untenable”.2

Can Mr Rankin be required to repay all outstanding debts before 7 October

2008?

[11] Mr Rankin says that under the terms of the deed of debt he agreed to repay

the debt “then outstanding” on the “20th anniversary of 7 October 2008” being

7 October 2028. He says that while the deed of debt provides for the repayment of interest on an annual basis, the deed of debt does not enable the Millie Trust to demand repayment of the principal outstanding in the event Getfunkd or he defaults in repaying interest or principal.

[12] Clause 2 of the memorandum contains a standard comprehensive definition

of “secured moneys”. The relevant part of that definition says that “secured moneys” means:

1 _{High Court Rules, r 15(1)(a).}

2. Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].

a party granting the security or an accommodated person to the

security holder ... (emphasis added)

[13] Clause 20 of the memorandum governs security holders’ rights and powers

_{on default of payment. Clause 20(a)(i) provides:}

_s

[15] Mr Rankin says cl 21 of the memorandum does not allow the Millie Trust to demand payment of all outstanding principal if Getfunkd or Mr Rankin defaults in making repayments.

[16] I disagree for two fundamental reasons:

(1) Secured moneys include moneys that are due “now and in the future”.

Accordingly, the text of cls 20 and 21 of the memorandum permits the lender to “call up the balance” of the principal if the borrower defaults.

(2) It would be commercially unrealistic for a lender to be unable to demand repayment of all outstanding principal in the event of a default in payment. No lender would ever agree to such a term. A purpose of cls 20 and 21 of the memorandum is to enable the lender to “call up” the balance of the principal outstanding in the event of a default in repaying principal and interest.

Conclusion

[17] The application for a strike-out must be dismissed. As I understand the pleadings, the real issue in this case concerns quantum. That is an issue that will only be able to be resolved following a hearing in which the factual disputes can be properly evaluated.

Costs

[18] Mr Dewar has sought costs. Ms van den Bergh advises that Mr Rankin is in receipt of legal aid. In these circumstances costs are reserved and will be determined

_{when the substantive proceeding is resolved.}

_{D B Collins J}

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiff

Upper Hutt Law, Upper Hutt for Defendant