Australia and New Zealand Banking Group Ltd v O'Sullivan [2001] FJLawRp 82; [2001] 1 FLR 315 (20 September 2001)

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED v AENEAS EDWARD O'SULLIVAN

High Court Civil Jurisdiction

17 November, 2000, 25 January, 2001, 20 September, 2001

HBC 267/00L

Summary Judgment - Guarantee – Defendant has provided no credible defence – factors the Defendant requires to exhibit in his affidavit in reply to summary judgment application: that the Defendant is not indebted to the Plaintiff in the amount claimed, why the Defendant is not so indebted, the real nature of the defence relied on, facts providing the basis for an objection must be attested to and the point of law clearly stated - High Court Rules O.14 rr.2(1), 2(2), 3(1), 4(1), 4(2), O.18 r.11; Guarantee Bailment and Indemnity Act

The Plaintiff sues the Defendant on a guarantee. The Defendant proposed 3 defences: there was confusion as to which lawyers represented the Plaintiff when the backing sheet stated Young & Associates but the indorsement said Gordon & Co, that demand was not served, although there was insufficient information as to whether it was received, and that the Defendant requested a copy of the guarantee, which was not supplied when the Defendant's solicitors already had a copy of the guarantee. The Court found that the affidavit material of a litigation clerk failed to verify the factual claims in the proposed Statement of Defence: the alleged misrepresentation, the incorrect particulars of debt, the inadequate advertising, and the sale at an undervalue, and failed to establish the Defendant's bona fides. The Defendant failed to demonstrate that this was not a straight-forward case of a bank calling up its guarantee.

Held – The Defendant's affidavit material by a litigation clerk, alleging credibility and bona fides failed to show cause within the limb "or otherwise to the satisfaction of the court" by verifying factual claims to enable the proposed Statement of Defence to be considered bona fide issues for trial. Mere allegations that a demand was not served, without evidence whether the Defendant received a demand, or putting the Plaintiff to strict proof of amount owed are insufficient to show cause. The affidavit needed to state why the Defendant is not indebted to the Plaintiff in the amount claimed and state the real nature of the defence relied on. The facts providing the basis for any legal objection and the point of law must be clearly stated.

Defendant has failed to show a bona fide defence and Judgment entered for the Plaintiff, together with interest and costs.

Cases referred to in Judgment

Australia and New Zealand Banking Group v David [1991] NTSC 74; (1991) 105 Fed LR 403; 1 NTLR 93
ANZ Banking Group v Sisilia Veiqaravi & 3 Ors [1991] HBC 262/99 8 September 1999
Hibiscus Shopping Town Pty. Ltd. v Woolworths (Q'land) Ltd. [1993] NTSC 21; (1993 113 Fed LR 106
Industrial Marine Engineering Ltd. v Te Mautari Ltd. & Anor [1997] HBG 0008/96 27 June 1997
Les Fils Dreyfus et cie S.A. v Clarke [1958] 1 All ER 459
Lagos v Grunweldt [1909] UKLawRpKQB 183; [1910] 1 KB 41
Maganlal Brothers Ltd. v L.B. Narayan & Company [1984] ABU 31/84 15 November 1984
Pathe Freres Cinema Ltd. v United Electric Theatres Ltd. [1914] UKLawRpKQB 187; [1914] 3 KB 1253
Ray v Newton [1912] UKLawRpKQB 152; [1913] 1 KB 249
re General Railway Syndicate; Whiteley's case [1900] UKLawRpCh 20; [1900] 1 Ch. 365

Chen B. Young for the Plaintiff
Devanesh Sharma for the Defendant

20 September, 2001

JUDGMENT

(Order 14 Summary Judgment Proceedings)
Gates, J

The Plaintiff bank sues the Defendant on a guarantee. Initially in the Statement of Claim that guarantee is said to have been dated 10 March 1997. Further down in the Statement it is said to have been dated 19 March 1987. It is clear however from the letter of Demand, the guarantee itself, and from both affidavits in support, that the date, 19 March 1987, was a typographical error. The correct date was indeed 10th March 1987.

Under the guarantee, it is said the Defendant now owes the Plaintiff, under a limited liability, $70,000, plus one year's interest at the rate of 13% per annum amounting to $9,100, making a total claim of $79,100. The Plaintiff seeks summary judgment pursuant to Order 14 against the Defendant for that sum with costs.

Order 14 r. 2 provides:

"(1) An application under rule 1 must be made by summons supported by an affidavit verifying the facts on which the claim, or the part of a claim to which the application relates is based and stating that in the deponent's belief there is no defence to that claim or part, as the case may be, or no defence except as to the amount of any damages claimed.

(2) Unless the Court otherwise directs, an affidavit for the purposes of this rule may contain statements of information or belief with the sources and grounds thereof."

The Plaintiff relies on the affidavit of Bharat Kumar, then Acting Manager, Asset Management of the Plaintiff, sworn on 18th October 2000. That affidavit meets the requirements of the rule [Order 14 rule 2(1)].

The Defendant must satisfy the court with respect to the claim or part of it "that there is an issue or question in dispute which ought to be tried..." [Order 14 rule 3(1)]. In order to get leave to defend the Defendant "may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the court" [Order 14 rule 4(1)]. Similarly the affidavit "may contain statements of information and belief with the sources and grounds thereof [Order 14 r. 4(2), following Ord. 14 r. 2(2)]. Whereas such evidence might suffice for indicating an obvious line of defence open to the Defendant, when the issues involve credibility and bona fides satisfactory evidence must needs be more direct to be convincing see Lagos v Grunweldt [1909] UKLawRpKQB 183; [1910] 1 KB 41 at p 48-49 applying an earlier stricter rule.

The Defendant has filed the affidavit of Sanjiesh Lal, a litigation clerk with the Defendant's solicitors, sworn on 14 November 2000, filed on 16 November 2000. He says:

"As the application for Summary Judgment is coming up on 17th November 2000 we have not been able to have an affidavit sworn by our client because he is resident abroad. However, we do not wish to hold the case up and to expedite matters we have taken instructions from our client and I am now instructed to depose to this affidavit on his behalf and to exhibit his proposed Statement of Defence."

Under the heading "Technical Arguments" he sets out in the affidavit 3 defences. They are, first that the Order 14 summons had been filed by Messrs Young & Associates whereas the summons had been issued by Messrs. Gordon & Co. He said their client was confused as to who the Plaintiff's solicitors were on record in this matter. The back sheet to the summons states the Plaintiff's solicitors as Messrs. Young & Associates. The inner indorsement says Messrs. Gordon & Co. The Defendant is represented by experienced counsel and I see no difficulty caused to his defence by such an error in the papers.

Next it is deposed that the Demand was not served at the correct address for the Defendant. There is no evidence from the Defendant, or anyone else with knowledge of such matters, or from this deponent, giving sources for his information, that the Defendant was not served the Demand. Other evidence as to where and how the Demand was served I need not go into. It was necessary for the Defendant to provide credible evidence of a defence on this issue, and this has not been done.

Thirdly it is deposed that a request was made for a copy of the Guarantee but that such has not been made available to the defence. Perhaps in error the deponent referred to "the Defendant's liability under a Demand dated 19th March 1997" when guarantee was in fact meant. The guarantee which it is said the Defendant signed was exhibited to Bharat Kumar's affidavit, a copy of which the Defence solicitors already had. The defence solicitors may have been under the impression there were 2 guarantees, one signed on 10 March 1997, and one on 19th March 1997. The guarantee relied on was clearly that exhibited to Bharat Kumar's affidavit i.e. the guarantee dated 10th March 1997. This was confirmed by the Plaintiffs solicitor's letter to defence solicitors of 10 November 2000. The Defendant's solicitors therefore already had a copy of the guarantee. This provides no evidence of a defence.

Lastly the deponent for the Defendant exhibited a copy of the proposed statement of defence. There was no evidence verifying any of the factual claims in that defence. That was the sum total of the affidavit material put up for the Defendant to show cause.

Before going further into the matter to see if the Defendant satisfies the court that there exist issues to be tried, I consider first why it was that the Defendant himself or any witness who could testify as to relevant facts failed to swear an affidavit. If not the Defendant, then "the other person who may make the affidavit must be able to swear positively to the facts" Pathe Freres Cinema Ltd. v United Electric Theatres Ltd. [1914] UKLawRpKQB 187; [1914] 3 KB 1253 at p 1255.

The Order 14 summons was filed on 25 October 2000. On 7 November 2000 the Defendant's solicitors wrote to the Plaintiffs solicitors stating inter alia that they had already taken instructions from their client on the summons. The letter set out 6 paragraphs of points arising. The letter concluded "Please note that we will refrain from filing an affidavit on behalf of our client until we have been able to advise him on the above issues." The Plaintiffs solicitors replied by fax on 10 November 2000, and on this issue said: "You may refrain from filing an affidavit but this letter must not be taken to be granting your client any indulgence."

None of the facts which might form the basis of the proposed statement of defence here is deposed to so as to provide necessary credible foundation for establishing a bona fide defence (the alleged misrepresentation, the incorrect particulars of debt, the inadequate advertising, the sale at an undervalue, etc.). In Les Fils Dreyfus et cie S.A. v Clarke [1958] 1 All ER 459 at p 464A Parker LJ said "...one looks at the matter at the end of the day on the affidavits which have been filed."

The Defendant fails to satisfy me on the affidavit material he has filed. Has the Defendant yet managed to show cause within the limb "or otherwise to the satisfaction of the court" [Order 14 rule 4(1)]? The only other material before me is the proposed defence. I shall not traverse all of the allegations, a good number of which were technical. The Defence claims the Plaintiff knew of his residence in Wellington. The Demand was sent to a post office box in Auckland, to an address the Plaintiff's witness deposes the Defendant gave to the bank at the time of the execution of the guarantee. As I have indicated earlier, there has been no evidence of non-receipt of the Demand.

The Defendant denies that Enormous Investments Ltd., whose loan with the Plaintiff he was guaranteeing, was indebted in "the sum of $155,884-51 together with interest at the rate of 13% as at 10 May 2000 and puts the Plaintiff to strict proof." This does not lend support to the claim that the Defence raised is bona fide.

The Defendant claims he was not served with proper reconciliation of accounts. He claims that there was no certificate as required under section 20 of the Guarantee certifying the interest rate charged. The Plaintiff answers by saying if it were in breach of the Guarantee Bailment and Indemnity Act Cap. 232, which is denied, the deed executed on 10 March 1997 also operates pursuant to Clause 19 as an independent indemnity.

It is alleged that the Plaintiff kept silent about a number of material factors. None of these matters formed part of the affidavit evidence, and I pay no regard to them.

It is also alleged that me Plaintiff was negligent in selling the customer's property as mortgage at a gross undervalue, and at the wrong time and without sufficient advertisement, and states "the Defendant seeks a reduction or credit for the amount of price that could have been obtained from the property had it been sold with reasonable care." None of this informs me that there exist other reasons, outside of the affidavits, to satisfy me that there are bona fide issues for trial. I note that it was the Defendant's own solicitor in New Zealand who verified that the Defendant "understood the true purport and effect of the document

In Industrial Marine Engineering Ltd. v Te Mautari Ltd. & Anor. (unreported) Suva High Court Admiralty Action No. 0008 of 1996; 27 June 1997 Pathik J. said at p 4:

"I am not unmindful of the fact that the mere raising of a defence whether complicated or not or difficult will not of itself result in a refusal to grant summary judgment."

His lordship referred to a decision of Thomas J. in which his lordship referred to the burden of proof in Hibiscus Shopping Town Pty. Ltd. v Woolworths (Q'land) Ltd. [1993] NTSC 21; (1993) 113 FLR 106 at 109:

"The legal burden of proof is borne by the Plaintiff throughout the application, however when he has established a prima facie right to an order, a "persuasive" or "evidential" burden shifts to the Defendant to satisfy the court that judgment should not be given against him:" see Australian & New Zealand Banking Group v David [1991] NTSC 74; (1991) 105 FLR 403; 1 NTLR 93."

The summons was returnable on 17 November 2000. On that day Mr. Sharma appeared for the Defendant and the summons was adjourned for hearing to 25 January 2001.

The day before Mr. Sharma had filed on behalf of his client the affidavit of his litigation clerk. On 17 November 2000 he could have asked for leave to file an additional affidavit, namely an affidavit from his client, the Defendant, in order to show cause. This was not done.

The Supreme Court Practice 1997 at p 157 summarises the Defendant's obligation in Order 14 proceedings:

"The Defendant's affidavit must "condescend upon particulars' and should, as far as possible, deal specifically with the Plaintiffs claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it."

In Maganlal Brothers Ltd. v L.B. Narayan & Company (unreported) Fiji Court of Appeal Civil Appeal No. 31 of 1984; 15 November 1984, O'Regan JA giving the judgment of the Court cited with approval the requirement set out in Halsbury's Laws of England (4th Edit.) Vol. 37 paras. 413-415. His lordship quoted from Note 4 at p 5 of the Judgment:

"The normal everyday practice is for the Defendant to show cause by affidavit, and except in a clear case, it is rare for the court to allow a Defendant to show cause otherwise than by affidavit."

In re General Railway Syndicate; Whiteley's case [1900] UKLawRpCh 20; [1900] 1 Ch. 365 the Court of Appeal eventually set aside the order refusing to strike out Whiteley's name from the list of contributories in a winding up. Though finding that Whiteley's affidavit did show a right to repudiate the shares, Lindley MR commented on the otherwise inadequate affidavit in these terms (at p 368-9):

"(the shareholder) filed an affidavit which shows no defence at all apart from the right to rescind. It starts with a formal statement that the deponent is not indebted. That goes for nothing unless you can find some circumstances which can throw light upon it and give rise to some reason for supposing that that is a true statement. I disregard that altogether."

In effect, the affidavit needs to state that the Defendant is not indebted to the Plaintiff in the amount claimed and should state why the Defendant is not so indebted, and go further and state the real nature of the defence relied on. If a legal objection is to be raised the facts providing the basis for such objection must be attested to and the point of law clearly stated [see Order 18 r. 11]. The English Court of Appeal allowed the Appellant in Ray v Newton [1912] UKLawRpKQB 152; [1913] 1 KB 249 to have delivery of his solicitors bill for taxation prior to entering his defence, for which he had had unconditional leave to defend. He was able to satisfy the court that it should allow him to do so. Hamilton LJ at p 257 observed:

"The application is supported by an affidavit of Mr. Newton, which contains quite sufficient materials for an investigation into the fairness and reasonableness of the agreement. Nearly every point in this case is in acute controversy; and I express no opinion whatever as to the result of that controversy; but in the first instance the Appellant makes out amply sufficient grounds for obtaining the order that he seeks."

In the case before me, unlike all of the cases cited, the affidavit material fails to deal with the necessary issues to show a credible defence is available: (cf. ANZ Banking Group v Sisilia Veiqaravi and 5 Others (unreported) Suva High Court Civil Action No. 262 of 1999; 8 September 1999 where Shameem J. at p 4 said the Statement of Defence was brief and uninformative but as a result of the Defendant's affidavit material the court was satisfied that the Defendant had raised "a bona fide defence and triable issues." The Defendant here has failed to demonstrate that this was not a straightforward case of a bank calling upon its guarantee. The case has an echo in the words of O'Regan JA in the Maganlal case (supra at p 9):

"In the present case, the defence raised by the Respondent is no more than a delaying tactic and we think that the Appellant should have interest from the date of the initial demand namely 25th July 1983 at 13.5%."

I am not satisfied that the Defendant has a bona fide defence to the Plaintiff's claim. Accordingly judgment will be entered for the Plaintiff for the sum of $79,100.00 with costs which I fix at $1,500 inclusive of disbursements.

Application succeeds.

Marie Chan