Published 15 August 2012
The Supreme Court has split 3-2 in a decision dominated by non-production of a collateral settlement agreement.
The dispute was between Wiltshire Investments Ltd (Alan Wiltshire), defending the High Court award of summary judgment that was confirmed by the Court of Appeal, and brothers Robert & Greg Symons, protesting the award against them – but only doing so on the basis of doubt about the non-produced agreement when the case reached the Court of Appeal for the second time.
In a decision released last Thursday, the Supreme Court majority of Chief Justice Dame Sian Elias, Justice Andrew Tipping & Justice Sir Willie Young set aside the summary judgment and sent the case back to the High Court for reconsideration once Wiltshire has disclosed the settlement agreement to the Symonses.
The Supreme Court minority of Justices Sir John McGrath & Robert Chambers didn’t just disagree with the majority, they were blunt about it. They suggested the court majority’s decision would encourage unsuccessful defendants to raise new grounds of defence on appeal, and it would damage the summary judgment process.
Further, Justices McGrath & Chambers said the court majority impugned the reputation of barrister & receiver Paul Sills without giving him a chance to respond, and also gave Mr Wiltshire no chance to respond. The Supreme Court minority turned that back on the court majority, pointedly highlighting what they saw as improper behaviour by their colleagues.
The 3 men involved in the dispute before the court, Mr Wiltshire & the Symonds brothers, were directors of 2 companies, Opus Fintek Ltd & Fibroin Initiatives Ltd, which received loans from ASB Bank. When the bank called in the loans in 2008, Mr Wiltshire & another of his companies paid the bank and were released from their guarantees, and the debts & associated securities, including the remaining guarantees, were assigned to Wiltshire Investments.
Opus Fintek’s primary business was to manage its interest in Hopscotch Money Ltd, a consumer finance company majority-owned by Chrisco Hampers Ltd subsidiary Hats Holdings Ltd.
Hats & Opus disagreed in 2007 over the running of Hopscotch and Hats agreed to buy Opus out for $5.2 million in 3 payments. Only the first payment of $500,000 was made. Opus used it to discharge loans from Hopscotch to Gregory Symons, his wife & Robert Symons.
When Opus sued for the balance, Hats counterclaimed for much more, alleging misconduct & breach of directors’ duties by the Symons brothers. Mr Wiltshire’s interests funded the Opus claim. In September 2009, Wiltshire Investments appointed Auckland barrister Paul Sills as receiver of Opus, and around the same time Mr Sills told the Symons brothers Wilshire would no longer fund the litigation against Hats.
In December 2009, Mr Sills concluded a full & final settlement of all claims between Opus & Hats, including a $1.4 million payment by Hats to Opus in instalments, which would then be forwarded to Wiltshire in reduction of Opus’ debt to it. But the written agreement wasn’t been disclosed then and hasn’t been disclosed in any of the court proceedings, although it was offered at a late stage to the Supreme Court.
Immediately after the December 2009 Hats settlement, Wiltshire demanded $2.7 million from the Symons brothers for the Opus debt and $866,000 from Fibroin Initiatives Ltd, which had been owned one-third each by Mr Wiltshire & the 2 brothers.
When Wiltshire detailed proof of the High Court summary judgment claim in May 2010, Mr Wiltshire declared that $1.14 million remained owing on the Opus debt and $841,000 on the Fibroin debt. A spreadsheet showed Hats had completed payment of the $1.4 million.
Associate Judge Roger Bell entered judgment for the sums claimed in July 2010, rejecting an adjournment application from the Symonses’ counsel, Matthew Karam, who’d said there were deficiencies in the case. Associate Bell said Wiltshire “has brought all the payments it received into account. It is not required to do more.”
The Supreme Court granted the Symonses leave to appeal on the question of whether Associate Judge Bell ought to have entered summary judgment despite nondisclosure of the 2009 settlement agreement.
In the Supreme Court hearing, Wiltshire counsel David Laurenson’s primary basis for defending non-disclosure of the settlement agreement was that it was irrelevant. Justice Young, delivering the majority decision, said: “His argument went like this. All that is material to the claim is the amount owed under the assigned debts. The only relevance of the Hats settlement is that it provided Opus with funds to make repayments. How Opus obtained that money is irrelevant to litigation between Wiltshire Investments and Gregory & Robert Symons. This irrelevance is all the more clear when the terms of the guarantees they executed are taken into account. They are in the usual bank form and thus contain clauses intended to preclude defences of the kind which guarantors tend to raise when sued.”
Justice Young said it was an exercise of joining up the dots: “It is possible that the rather shadowy picture which has emerged is not accurate and conceivably not entirely fair to those associated with Wiltshire Investments. If so, Wiltshire Investments has only itself to blame. It was for that company, as plaintiff, to establish that there was no defence to the entry of summary judgment, and the corollary of its withholding of the settlement agreement is that it failed to do so and accordingly did not make out its case for summary judgment.
“All of that said, the appellants must accept some responsibility for what has happened in that they advanced untenable defences in the High Court and did not raise the argument they have succeeded on in this court until very late in the piece. Our judgment in their favour is a considerable indulgence.
“We recognise that it may well be that the settlement agreement, once disclosed, will not provide an arguable defence. In those circumstances, we think it right to afford the respondent an opportunity to renew its application to the High Court for summary judgment once disclosure has been made. As well, although we consider that the awards of costs made in the High Court & Court of Appeal should be set aside, we do not propose to award costs in relation to the appeal to this court.”
Minority goes beyond courteous dissent
The Supreme Court minority of Justices Sir John McGrath & Robert Chambers didn’t just disagree with the majority, they were blunt about it. Justice Chambers said in their dissenting reasons: “We would dismiss the appeal. We think Associate Judge Bell was correct to enter summary judgment in Wiltshire’s favour and that the Court of Appeal was correct in dismissing the appeal.
“Associate Judge Bell found that Wiltshire had established the appellants had no defence on the basis of what was in issue before him. That he was right in that regard is demonstrated by the fact that none of the potential defences then being run is still being run. Similarly, the Court of Appeal was correct to dismiss the appeal on the basis of the issues run before it. What the appellants have now succeeded upon – the speculative side-deal – was not before the Court of Appeal. [I interpolate: The “speculative side deal” should really be referred to as what the Symonses have speculated could have been a side deal favourable to Mr Wiltshire].”
Justice Chambers said the possibility of a side deal seemed to have been raised for the first time by a Court of Appeal judge, but that court didn’t investigate it further and didn’t mention it in its written judgment.
“The assertion, for which there is no evidence, necessarily imputes a dereliction of duty on the part of Mr Sills: he has given away money which should have been Opus’s. In the unlikely event he did that, he would almost certainly be liable as receiver to, among others, the appellants. Mr Sills is a practising barrister & an experienced receiver. In his affidavit, he has deposed to the obligations on him as receiver and has confirmed that he has ‘acted in good faith & for a proper purpose’. There is no evidence to the contrary. He has had no opportunity to respond to these new allegations against him. Nor has Mr Wiltshire.
“The fact the guarantor wants to see a document does not of itself make the document relevant and a refusal to supply fatal. The bank’s refusal to disclose its file to the guarantor in Herron v Westpac New Zealand Ltd did not prevent the bank obtaining summary judgment. The Court of Appeal relied on a bank officer’s assertion that the file contained nothing of relevance. This court declined leave to appeal. So here we see no reason to doubt the summary of the settlement agreement provided by Messrs Sills & Wiltshire.
“We regret the speculation as to a possible side-deal has led to the majority setting aside Wiltshire’s summary judgment. The fact it is mere speculation is shown by the fact the majority are prepared to countenance Wiltshire’s bringing a fresh application for summary judgment if the settlement agreement proves to be irrelevant, as Wiltshire has always contended.
“Mr Laurenson, at the hearing before us, offered to let us see the settlement agreement. The majority have rejected that offer but are now content apparently for it in effect to be shown to the High Court and then for the summary judgment procedure to start all over again, if appropriate.
“If any court was to look at the settlement agreement, we would have thought it should have been us. It is hard to see why the appellants are granted an indulgence to raise a matter for the first time in this court but Wiltshire is not accorded an indulgence in response.
“We fear this decision will encourage unsuccessful defendants on summary judgment applications to raise new grounds of defence on appeal, thereby depriving the summary judgment procedure of much of its utility.”
Nevertheless, Justice Chambers hoped for the alternative, that it might be interpreted as a one-off solution to unusual forensic circumstances.
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Attribution: Judgment, story written by Bob Dey for the Bob Dey Property Report.