Kerr & Ors v Bank of New Zealand - [2024] NZCA 684
Date of Judgment
19 December 2024
Decision
Kerr & Ors v Bank of New Zealand (PDF 485 KB)
Summary
The application for leave to adduce further evidence dated 11 September 2023 is granted; the application for leave to adduce further evidence dated 23 November 2023 is declined. The appeal is dismissed.
The respondents are awarded costs on an indemnity basis.
Summary judgment – Commercial law – Quantum
Associate Judge Gardiner entered summary judgment in the High Court against Mr George Kerr and a group of related corporate defendants (together, the appellants) (the Liability Judgment). The Judge subsequently quantified the amount owing, in the sum of approximately $65 million (the Quantum judgment). The Judge found that the appellants had no reasonably arguable defences to claims made against them (as either borrowers or guarantors) by Bank of New Zealand (BNZ) arising out of two substantial loan facilities provided to Lothian Partners Capital Ltd (Lothian), and Pyne Holdings Ltd (Pyne Holdings). Specifically, the Judge found it was not reasonably arguable that BNZ’s claims were time-barred under the Limitation Act 2010, as Mr Kerr had acknowledged liability to pay the outstanding debts on behalf of both himself (as guarantor) and the corporate appellants (as borrowers or guarantors) during the primary limitation period, giving rise to fresh claims. The Judge further found that Galt Nominees Ltd (Galt) and Glencoe Land (Joint Venture) Ltd (Glencoe JV) had no reasonably arguable defence to BNZ’s claim for recovery of an indemnity costs award of$243,419.84 (Costs Award) arising out of an unsuccessful injunction application brought by those companies against the BNZ. Mr Kerr, Lothian and Pyne Holdings were also liable to pay the Costs Award in their capacity as co-guarantors of Galt’s obligations under the Lothian Facility Agreement.
Did the Judge err in finding that Mr Kerr had acknowledged his personal liability as guarantor during the primary limitation period, giving rise to fresh claims against him? Held: No.
The corporate appellants are all closely associated with Mr Kerr. He is, or was previously, a director of each of them. Following the defaults on the loan facilities, Mr Kerr assumed overall responsibility for ensuring repayment of the outstanding debt on behalf of all of the appellants. His acknowledgements of liability were not made solely on behalf of the corporate appellants. Mr Kerr was the sole point of contact with BNZ following the defaults for almost eight years in respect of the Lothian Facility, and almost six years in respect of the Pyne Holdings Facility. He engaged in a sustained, consistent pattern of communication with BNZ during this time regarding the outstanding debt and his proposals for repaying it. In his correspondence, Mr Kerr used terms such as “my facilities” and “my companies”. He almost always signed his communications “George” and they were sent from his personal email address without any identifying corporate logos or email signatures. Mr Kerr consistently used possessive terms like “we” and “our” and language such as “we expect,” “we understand,” and “we wish to make a proposal” in his communications. Mr Kerr did not differentiate himself from the corporate appellants at any stage. Rather, the tone and content of Mr Kerr’s communications indicated that he was speaking both for himself and “his” companies. Viewed objectively, the inevitable inference is that Mr Kerr was acknowledging his personal liability as a guarantor of both facilities, in addition to acknowledging the liability of the corporate appellants under those facilities.
Did the Judge err in finding that Mr Kerr’s acknowledgements of liability extended to both principal andinterest? Held: No.
As Mr Kerr acknowledged liability to pay interest, it is immaterial that he sought to negotiate to pay a lesser sum than BNZ were seeking as he did not specifically record that limitation.
Did the Judge make errors in her assessment of quantum? Held: No.
The appellants did not raise an arguable defence to the quantum claimed by the BNZ. The various challenges to quantum were almost entirely based on the expert evidence of Mr Cornmell on behalf of the appellants. Mr Kerr, who was the person best placed to provide factual evidence regarding the challenged transactions, did not specifically address any of them in his evidence. In the absence of such evidence from Mr Kerr (or any other Pyne Holdings or Lothian witness) there was an insufficient evidential foundation for Mr Cornmell’s opinions. The factual evidence that was before the Court, including affidavit evidence filed by BNZ and the contemporaneous documents, indicated that there was no substance to the various issues identified by Mr Cornmell. Ultimately, as the appellants were unable to show that there was specific, credible evidence of arguable errors in BNZ’s assessment of quantum, the Judge did not err in entering summary judgment.
Is the Costs Award recoverable? Held: Yes.
The limitation of liability clauses in the Galt and Glencoe JV Guarantees do not preclude BNZ from recovering the Costs Award. The obligation in those guarantees to pay BNZ’s enforcement costs, on an indemnity basis, is a distinct and separate contractual obligation imposed on Glencoe JV and/or Galt to meet any costs BNZ may incur in enforcing their obligations as guarantors. This obligation is in addition to Galt and Glencoe JV’s obligations as guarantors to meet the guaranteed indebtedness under the relevant facility agreement.
Is BNZ entitled to recover indemnity costs in respect of the appeals? Held: Yes.
As the successful party, BNZ is entitled to an award of indemnity costs in respect of the appeal in accordance rule 53E(3)(e) of the Court of Appeal (Civil) Rules 2005 and its entitlement to recover indemnity costs under the terms of the relevant contracts.
The respondents are awarded costs on an indemnity basis.
Summary judgment – Commercial law – Quantum
Associate Judge Gardiner entered summary judgment in the High Court against Mr George Kerr and a group of related corporate defendants (together, the appellants) (the Liability Judgment). The Judge subsequently quantified the amount owing, in the sum of approximately $65 million (the Quantum judgment). The Judge found that the appellants had no reasonably arguable defences to claims made against them (as either borrowers or guarantors) by Bank of New Zealand (BNZ) arising out of two substantial loan facilities provided to Lothian Partners Capital Ltd (Lothian), and Pyne Holdings Ltd (Pyne Holdings). Specifically, the Judge found it was not reasonably arguable that BNZ’s claims were time-barred under the Limitation Act 2010, as Mr Kerr had acknowledged liability to pay the outstanding debts on behalf of both himself (as guarantor) and the corporate appellants (as borrowers or guarantors) during the primary limitation period, giving rise to fresh claims. The Judge further found that Galt Nominees Ltd (Galt) and Glencoe Land (Joint Venture) Ltd (Glencoe JV) had no reasonably arguable defence to BNZ’s claim for recovery of an indemnity costs award of$243,419.84 (Costs Award) arising out of an unsuccessful injunction application brought by those companies against the BNZ. Mr Kerr, Lothian and Pyne Holdings were also liable to pay the Costs Award in their capacity as co-guarantors of Galt’s obligations under the Lothian Facility Agreement.
Did the Judge err in finding that Mr Kerr had acknowledged his personal liability as guarantor during the primary limitation period, giving rise to fresh claims against him? Held: No.
The corporate appellants are all closely associated with Mr Kerr. He is, or was previously, a director of each of them. Following the defaults on the loan facilities, Mr Kerr assumed overall responsibility for ensuring repayment of the outstanding debt on behalf of all of the appellants. His acknowledgements of liability were not made solely on behalf of the corporate appellants. Mr Kerr was the sole point of contact with BNZ following the defaults for almost eight years in respect of the Lothian Facility, and almost six years in respect of the Pyne Holdings Facility. He engaged in a sustained, consistent pattern of communication with BNZ during this time regarding the outstanding debt and his proposals for repaying it. In his correspondence, Mr Kerr used terms such as “my facilities” and “my companies”. He almost always signed his communications “George” and they were sent from his personal email address without any identifying corporate logos or email signatures. Mr Kerr consistently used possessive terms like “we” and “our” and language such as “we expect,” “we understand,” and “we wish to make a proposal” in his communications. Mr Kerr did not differentiate himself from the corporate appellants at any stage. Rather, the tone and content of Mr Kerr’s communications indicated that he was speaking both for himself and “his” companies. Viewed objectively, the inevitable inference is that Mr Kerr was acknowledging his personal liability as a guarantor of both facilities, in addition to acknowledging the liability of the corporate appellants under those facilities.
Did the Judge err in finding that Mr Kerr’s acknowledgements of liability extended to both principal andinterest? Held: No.
As Mr Kerr acknowledged liability to pay interest, it is immaterial that he sought to negotiate to pay a lesser sum than BNZ were seeking as he did not specifically record that limitation.
Did the Judge make errors in her assessment of quantum? Held: No.
The appellants did not raise an arguable defence to the quantum claimed by the BNZ. The various challenges to quantum were almost entirely based on the expert evidence of Mr Cornmell on behalf of the appellants. Mr Kerr, who was the person best placed to provide factual evidence regarding the challenged transactions, did not specifically address any of them in his evidence. In the absence of such evidence from Mr Kerr (or any other Pyne Holdings or Lothian witness) there was an insufficient evidential foundation for Mr Cornmell’s opinions. The factual evidence that was before the Court, including affidavit evidence filed by BNZ and the contemporaneous documents, indicated that there was no substance to the various issues identified by Mr Cornmell. Ultimately, as the appellants were unable to show that there was specific, credible evidence of arguable errors in BNZ’s assessment of quantum, the Judge did not err in entering summary judgment.
Is the Costs Award recoverable? Held: Yes.
The limitation of liability clauses in the Galt and Glencoe JV Guarantees do not preclude BNZ from recovering the Costs Award. The obligation in those guarantees to pay BNZ’s enforcement costs, on an indemnity basis, is a distinct and separate contractual obligation imposed on Glencoe JV and/or Galt to meet any costs BNZ may incur in enforcing their obligations as guarantors. This obligation is in addition to Galt and Glencoe JV’s obligations as guarantors to meet the guaranteed indebtedness under the relevant facility agreement.
Is BNZ entitled to recover indemnity costs in respect of the appeals? Held: Yes.
As the successful party, BNZ is entitled to an award of indemnity costs in respect of the appeal in accordance rule 53E(3)(e) of the Court of Appeal (Civil) Rules 2005 and its entitlement to recover indemnity costs under the terms of the relevant contracts.