Davis v Santos Ponsonby Limited [2015] NZHC 2508 (13 October 2015)

Last Updated: 21 October 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-001216 [2015] NZHC 2508

BETWEEN	VICTOR CLIFFORD SCOTT DAVIS AND KERRY SEAN DAVIS AS TRUSTEES OF THE SCOTT DAVIS FAMILY TRUST Plaintiff
AND	SANTOS PONSONBY LIMITED Defendant

Hearing:	28 September 2015
Appearances:	R B Hucker and J L Schwarcz for the Plaintiffs J Ussher for the Defendant
Judgment:	13 October 2015

_{JUDGMENT OF ASSOCIATE JUDGE SARGISSON}

This judgment was delivered by me on 13 October 2015 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date.......................................}

Solicitors:

Hucker & Associates, Auckland

_{J Ussher, Auckland}

DAVIS & Anor v SANTOS PONSONBY LIMITED [2015] NZHC 2508 [13 October 2015]

Summary

[1] The plaintiffs, Scott and Kerry Davis, are brothers. They are also the trustees of the Scott Davis Family Trust. They apply for summary judgment on their claim against the defendant company, Santos Ponsonby Limited. Their claim is in essence that Santos is liable to repay them for on-demand loans that they say they made to Santos in their capacity as trustees of the trust in 2013. They say that they have made demand for repayment, and that Santos has failed to repay.

[2] It is not in dispute that advances were made that have not been repaid despite demand. Santos’s case is that the advances are not repayable, and in any case that it has no liability to repay trust monies or, consequently, the plaintiffs as trustees. Additionally, Santos disputes the quantum of the advances, particularly those relating to legal fees and a few other invoices.

Background

[3] The defendant, Santos, is a company whose sole director and shareholder is one Anne Sim. Santos operates a café trading as Santos Café.

[4] In late 2011, while Ms Sim and Scott Davis were living together, Ms Sim decided that the café needed to be refurbished. She made up a budget for the required works, which amounted to $63,077.50. She could not pay that sum herself. Mr Davis agreed to lend it to her. By the time that the work got underway, in early

2013, Ms Sim and Mr Davis had separated. He, however, honoured the earlier agreement to provide funding.

[5] The agreement, it appears, was an oral one. Its terms are in dispute. Ms Sim says that the loan was to be repaid only if the café began to turn a profit; and in that case, only 50% of the principal sum was to be repaid. Mr Davis says otherwise. According to him, no term was specified for repayment; as such, the loan was repayable on demand. It is also in dispute where the funds came from: Ms Sim says they were Mr Davis’ personal funds, while Mr Davis says he made the loan in his capacity as a trustee and the money was trust money. In any event, an advance of

$62,913.58 was advanced to Santos through payments made directly to contractors and other creditors, and by cash advances to the joint bank account of Mr Davis and Ms Sim.

[6] In June 2013, Ms Sim requested further funds to finish the refurbishment works in the café. Mr Davis proposed to provide those funds, but on specific terms. Those involved, among other things, the provision of a general security agreement; a schedule of payments; a default interest rate (though no interest was to be charged unless there was a default); and a written acknowledgement that Ms Sim and Mr Davis had been living together in a relationship of less than three years’ duration. In return, $35,000, or about half, of the first advance was to be forgiven, though this forbearance was contingent on Santos’ ability to pay its debts as they fell due, in particular the tax arrears it owed to the IRD.

[7] Ms Sim apparently did not accept his terms. A further advance was, however, provided. On 20 November 2014, the plaintiffs made demand for repayment of the advances on the basis that, though the terms had not been accepted, due to the parties’ conduct they were to be treated as if they had been accepted. $77,594 was sought, incorporating the $35,000 forgiveness. No response was received and the plaintiffs filed these proceedings, seeking repayment of the full sum, which they say is $131,609.24. Santos declined to pay. Ms Sim contends that the further advances were made by Scott Davis essentially on the same oral terms as those she says applied to the first tranche of advances - she was to repay half the sum she was advanced, and then only if the business began to make a profit. Ms Sim submits alternatively that if I do not find for her on direct contractual grounds, Mr Davis is estopped from calling up the advance.

Approach to summary judgment

[8] The principles governing an application for summary judgment are uncontroversial:¹

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: Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1at 3 (CA). 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: MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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: Eng Mee Yong v Letchumanan [1980] AC 331at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[9] In this case, the essential issues that I must determine in the plaintiffs’ favour

in order to enter judgment for them are:

(a) What was the amount lent? (Is there a genuine dispute as to quantum?)

(b) What were the terms governing repayment of the advances?

(c) Are the plaintiffs estopped from claiming repayment of the advances? [10] Initially, there was some dispute as to whether Mr Davis personally was the

lender, or whether (as the plaintiffs claim) they lent the money as trustees. Materially, counsel for Santos conceded that the point is not determinative. As he pointed out, the lender is either Mr Davis personally or the trustees, and an order for substitution could not realistically be resisted if, as Santos contends, the lender was Mr Davis personally. While therefore I agree with him that the parties seeking summary judgment should have “all their ducks in a row”, especially in such fundamental matters as identifying the parties, in this case the point can be left to one side. The real issue is whether there is a genuine dispute as to liability that stands as an impediment to summary judgment. Any genuine dispute as to quantum,

if the only real dispute, will not preclude my entering judgment as to liability.²

Analysis – liability

[11] It seems to me that what is determinative in this application for summary judgment is a direct conflict of evidence as to the terms that govern the advances. Both sides have argued the law, but there is no real disagreement there. As the plaintiffs argue, if there is no term governing the repayment of a debt, then that debt

must be repaid on demand.³ But that does not dispose of the matter. The

fundamental conflict is one of fact. Ms Sim says there was a term governing the repayment of debt, which ousts that presumption. Mr Davis says there was not. That is the point on which the whole case turns. The repayment terms, if there were any, also govern the quantum owed (excluding, perhaps, a few extraneous expenses). As to both liability and quantum of repayments, then, there is a genuine dispute.

[12] Similarly, one of the elements Ms Sim must prove to show the defendants are estopped from calling up the advances is that there must have been a representation that some or all of the debt was to be forgiven – a representation very similar to the oral term Ms Sim contends, but occurring after the oral terms were agreed. Ms Sim says there was such a representation. Mr Davis says there was not.

[13] It is well established that in summary judgment, the courts will not usually resolve major conflicts of evidence. I note, in particular, that Krukziener mentioned specifically that it will be rare for the courts to make assessments of credibility in an application for summary judgment.⁴ That statement must be even more decisive where, as here, that assessment of credibility will determine the matter in its entirety.

[14] If this were a purely commercial agreement, and Ms Sim made the same arguments she does now, then I might consider that she was asking me to accept her evidence uncritically. But there are sensible explanations for why that arrangement might have been entered into, particularly as between people who were in a relationship with each other, and there is some supporting evidence that suggests a possible foundation for Ms Sim’s contentions. She relies on emails, including an

_{email of 13 March 2013, that lends some support at least for the 50% repayment}

³ Norton v Ellam [1837] EngR 183; (1837) 2 M & W 461, approved in Contact Energy Ltd v Attorney-General

_{[2009] NZCA 351.}

⁴ At [26].

profit. ⁵ The email sent to Ms Sim by Mr Davis relevantly states:

[...] please tell me what you think you may be able to support paying me

back in return for this financial assistance and over what time frame.

REMEMBER I said I wasn’t looking for it all and I said it was only IF the business was back on track making money!

[15] Unanswered questions remain. That suggests that the matter is not appropriately dealt with by way of summary judgment, and should go to a full hearing where the evidence and the parties’ credibility can be fully tested.

[16] My conclusion on that point is strengthened by the fact that, though the plaintiffs acknowledge that Ms Sim never signed the terms of agreement they proposed, they made demand on Santos as if she had. That tends to undermine somewhat the plaintiffs’ apparent certainty about what they are entitled to. It may well be that their version of events is correct, but I simply cannot be sure of what happened.

[17] That being so, the matter is not amenable to summary judgment.

Result

[18] The application for summary judgment is declined.

[19] I reserve the issue of costs in accordance with the Court of Appeal’s judgment

_{in NZI Bank Ltd v Philpott.}⁶

⁵ Ms Sim relied particularly on an email of 13 March 2013, which said, among other things:

[...]

I am not asking for all of it to be paid back... perhaps 50% and over a reasonable time period... was thinking 3yrs?

⁶ NZI Bank Ltd v Philpott [1990] 2 NZLR 403, (1990) 3 PRNZ 695

Associate Judge Sargisson