DORCHESTER FINANCE (BOP) LTD V LABRADOR HOLDINGS LTD AND ORS HC TAU CIV 2008-470-169

DORCHESTER FINANCE (BOP) LTD V LABRADOR HOLDINGS LTD AND ORS HC TAU CIV 2008-470- 169 7 August 2008IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY CIV 2008-470-169BETWEEN DORCHESTER FINANCE (BOP) LIMITED Plaintiff AND LABRADOR HOLDINGS LIMITED First Defendant AND ERYN LLOYD MOORE Second Defendant AND STEPHEN JAMES BRENNAN Third Defendant AND MALLARD TRUSTEES LIMITED Fourth Defendant AND AWATERE TRUSTEES LIMITED Fifth Defendant Hearing: 17 July 2008 (Heard at Rotorua) Appearances: Mr Zane Kennedy for Plaintiff Mr K Johnston for Defendants Judgment: 7 August 2008 at 4 p.m.JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on07.08.08 at 4 pm, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar DateCounsel: MinterEllisonRuddWatts, P O Box 3798, Auckland Mr K Johnston, Lambton Chambers, P O Box 5058, WellingtonBackground[1] The following statement of the background to this proceeding is largely taken from the plaintiff's synopsis of submissions which provides an accurate summary of the background to the parties' dispute. [2] The plaintiff, (Dorchester) and the first defendant, Labrador Holdings Limited (Labrador), entered into a loan on 6 July 2007 (First Loan Agreement) for the sum of $1.65 million. In the same month, Dorchester and Bethco - which was a company related to Labrador - entered into a term loan agreement under which Dorchester advanced to Bethco the sum of $2,425,000. That was followed by a further agreement on 31 July 2007 in terms of which Dorchester agreed to advance to Bethco the sum of $5,240,000. [3] On 30 September 2007 the First Loan Agreement expired. Negotiations commenced between the defendants and Dorchester to extend and increase the facility under the First Loan Agreement. On 17 October 2007 Labrador and Dorchester signed letters of offer of finance. I shall refer to the Labrador letter as theLetter of Offer. The same day Dorchester and Bethco entered into a similar 'letter of offer' with respect to the Bethco facilities. The Bethco loans had expired on 10 June 2007. [4] On 7 November 2007, the defendants executed a "roll over agreement" (Roll Over Agreement) which was intended to refinance the First Loan Agreement and provide further finance additional to the amount owing under the First Loan Agreement. [5] On 22 November 2007 Dorchester's solicitors advised the defendants that it was to be a further condition of the Roll Over Agreement that titles were to issue in respect of a subdivision of land that Bethco was carrying out at Bethlehem by 7 December 2007. Obviously Bethco was not a party to the Roll Over Agreement but the intent, I understand, was that Labrador would procure Bethco to meet the terms of such a requirement. [6] The notification of this additional condition relating to the issue of the sub- division titles on the land belonging to Bethco was justified on two separate bases byDorchester. First, an executive of the company purported to withdraw the Letter of Offer in reliance on a particular clause that that letter contained. At the hearing before me Mr Kennedy accepted for Dorchester that by the time Dorchester did so, it was too late to invoke the particular clause relied upon. However the communication from the executive of Dorchester was followed by a further one from Dorchester's solicitors, Brown and Sargent, imposing a similar requirement concerning the issue of the Bethco titles by 7 December 2007 and stating that failure to comply with that requirement constituted breach of the Roll Over Agreement. It is these two communications which are at the heart of the dispute between the parties. [7] At the point when the requirement was purportedly imposed, the defendants had already signed the Roll Over Agreement, which did not contain any provision of the kind which Dorchester was now insisting on. The broad justification which is now offered for Dorchester taking such an approach is that, even though the Roll Over Agreement had been signed by the defendants, the time which they had to uplift the loan had expired and Dorchester had no further obligation in terms of the Roll Over Agreement to proceed further with the advance. However, it is Dorchester's position that it would have been prepared to extend or renew the availability of the facility provided it received an additional assurance in the form of undertakings concerning the early issue of titles in respect of Bethco's Bethlehem subdivision. I shall return to this subject later. [8] On 26 November 2007 Labrador's solicitors advised Dorchester's solicitors that Bethco was unable to comply with the requirement for the issue of titles. Thereafter Dorchester served notices under the Property Law Act 1952 on Labrador which expired unremedied on 10 January 2008. [9] The point was therefore reached in November 2007 that Dorchester took the view that the Roll Over Agreement not having proceeded, the defendants were in default under the First Loan Agreement, which it then attempted to enforce. [10] On 22 February 2008 Labrador paid the sum of $880,266.62 in reduction of the amount owing.[11] In March 2008 Dorchester issued proceedings against the defendants. In those proceedings it claimed in respect of alleged breaches of the First Loan Agreement. Included in the sum of $720,863.87 which it claims in these proceedings are extension fees and release fees under the Roll Over Agreement of $55,125. [12] The defendants do not accept the quantum of the plaintiff's claim. They say that even if they are indebted to the plaintiff for principal and interest and other charges under the First Loan Agreement, they have a set-off available to them which precludes the plaintiff from obtaining summary judgment in this proceeding. I will say more about those issues below. [13] Dorchester has now brought an application for summary judgment against Labrador, the second defendant, Erynn Lloyd Moore, the third defendant, Stephen James Brennan, the fourth defendant, Mallard Trustees Limited (as trustee of the Deep River Trust), and Awatere Trustees Limited (as trustee of the Awatere Trust) pursuant to the First Loan Agreement, the Roll Over Agreement, and the Letter Of Offer. [14] In support of its application, Dorchester has filed two affidavits of Leigh Neilson, sworn 7 March 2008 and 19 May 2008, an affidavit of Peter Sargent, sworn 4 July 2008 and a further affidavit of G. Pearce sworn 16 July 2008. [15] The grounds for Dorchester's application are set out in the application. In summary they are that: a) the defendants failed to pay moneys owing to Dorchester in accordance with the First Loan Agreement; b) by way of the Letter of Offer Dorchester agreed to extend and increase the First Loan Agreement on the express condition that the defendants would pay all fees (including solicitor/client legal fees and the extension fee) whether or not draw down of the loan proceeded for any reason;c) the terms of the Roll Over Agreement superseded the terms of the Letter of Offer to the extent they were inconsistent; d) draw down of the loan did not proceed as Labrador could not satisfy the conditions precedent under the Roll Over Agreement and the Letter of Offer; e) the defendants remain liable for all moneys outstanding under the First Loan Agreement and the Roll Over Agreement, including the fees referred to at paragraph (b) (above). [16] The defendants have together filed a notice of opposition to Dorchester's application, and an affidavit of Mr Brennan in support, sworn 16 April 2008. The defendants' case disclosed by their pleadings was, primarily, that they are entitled to set-off against Labrador's liability to Dorchester the costs and fees which Dorchester charged to a different company, Bethco Limited. The specific grounds for the defendants' opposition are set out in the notice of opposition and in the affidavit of Mr Brennan. In summary they are that: a) Dorchester was not entitled to charge Bethco for establishment and other fees paid by Bethco under separate Bethco Roll Over Agreements. Accordingly, Labrador has a valid claim to set-off those sums against the amounts claimed by Dorchester in this proceeding; b) the defendants are not liable for fees referred to at paragraph [15] (b) (above) because Dorchester purported to vary separate Bethco Letters of Offer by requiring a new condition, namely that new titles issue for the subdivision of the Bethco Bethlehem development by 7 December 2007; c) this purported variation rendered the Bethco Letter of Offer and/or the Bethco Roll Over Agreements void in accordance with clause 6 of the Bethco Letter of Offer. Alternatively, it amounted to an unlawfulcancellation of the Bethco Letter of Offer and/or Bethco Roll Over Agreements; d) as the Bethco and Labrador Letters of Offer were conditional on them both proceeding, the Labrador Letter of Offer and/or Roll Over Agreement was unlawfully cancelled. [17] What seems to have occurred is that even after the Roll Over Agreement was signed the parties assumed that there would be still further agreement required on implementation of the loan agreement. The activities that fell into this part of the chronology included agreement on priority of the plaintiff's mortgage and the amount that would be repaid on the sale of a property at Hunterville over which a second mortgage had been granted by the defendants. I interpolate that this is not a matter that seems to have been covered in the agreements that the parties came to in the loan offer and the facility agreement. However taking a common-sense approach to matters, the solicitors acting for the defendants did not apparently take exception to the plaintiff raising matters about, in particular, the Hunterville mortgage, in circumstances where that issue had not been provided for in the previous agreements. [18] The defendants did not dispute that the contractual arrangements between the parties were contained in the Letter of Offer and the Roll Over Agreement with the provisions of the Roll Over Agreement prevailing in the event of inconsistency between the two documents. Nor do they dispute that the defendants other than Labrador guaranteed the obligations of Labrador. [19] The plaintiff asserts that the principal amount owing under the First Loan Agreement is due and owing and that the defendant is in default under that agreement. The defendants for their part do not dispute that they owe the principal and interest that have accrued under the First Loan Agreement. They say that they have counter-claims against the plaintiff upon which they can found defences of set- off.Approach[20] I remind myself that for the purposes of summary judgment, the defendant need only show that it has an arguable defence. [21] The principles which apply to an application for summary judgment have been clearly established through decisions of the Court of Appeal such as Pemberton v Chappell [1987] 1 NZLR 1; Grant v New Zealand Motor Corporation Ltd (1989) 1 NZLR 8 and Westpac Banking Corporation v MM Kembla New Zealand Limited[2001] 2 NZLR 298. [22] In his judgment in Pemberton v Chappell at page 3, Somers J said:If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward a real defence. At the end of the day r 136 requires that the plaintiff "satisfies the Court that a defendant has no defence". In this context the words "no defence" have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence. See egWallingford v Mutual Society (1880) 5 App Cas 685, 693; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99; Orme v De Boyette [1981] 1 NZLR 576. On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty.[23] I therefore propose to apply the following general principles, which apply to all applications for summary judgment: a) The plaintiff must satisfy the Court that the defendant has no arguable defence to the claims brought against it. b) It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise.c) Although the Court should adopt a robust approach, nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment which can only properly be reached after a full hearing of all the evidence.The issue of whether Dorchester breached its loan agreement with Labrador by requiring immediate issue of Bethco titlesIntroduction[24] The parties' relationship was governed by both the Letter of Offer dated 17 October 2007 and the Roll Over Agreement signed 7 November 2007. There was no dispute that the Letter of Offer and Roll Over Agreement both bound the parties.Defendants' submissions[25] In the course of his commendably succinct submissions, Mr Johnston placed particular emphasis on the email that Mr Neilson, the general manager of the plaintiffs, sent to Labrador on 22 November 2007. It is necessary to refer to the terms of the email, which stated:Given the significant delays in settleing these Rollovers, (offers dated 17/10/07), and The well over due 'availability date'., Dorchester is now invoking clause 6 'directors approval' clause, by way of advising and requiring an additional condition., mainly: The issue of new Titles for the Bethlehem development, by LINZ, is required by 7/12/07. Non-satisfaction of this requirement to constitute a default, under the facilities, at Dorchester's discretion. (sic)[26] Mr Johnston pointed out that the plaintiff had since modified its position in that it now accepted that clause 6 could not have been invoked at the point when Mr Neilsen sent this message because Dorchester's directors had already approved the agreement. The directors having approved the loan offer, it was too late for a further condition to be attached, as Mr Neilsen sought to do. [27] Mr Johnston said that the plaintiff was now asserting that it corrected this mistaken position a few hours later when Dorchester's solicitor, Mr Sargent, sent afollow up email to the solicitors acting for the defendants which was in the following terms:I have been advised by Dorchester that given ongoing delays Dorchester's directors have required a further condition to extension of the Bethco and Labrador loan facilities, namely: The issue by LINZ of new Certificates of Title for the sub division of the Bethlehem development is required by 7 December 2007. Failure to comply with this condition will, at Dorchester's discretion, be deemed to constitute an Event of Default/Enforcement event under the loan facilities. Dorchester has advised your client direct of this requirement.[28] Mr Johnston said this was not a correction of the position; rather it was a reiteration of it. He said that the issue is whether, as between the plaintiff and Labrador, the plaintiff was entitled to impose such a condition. Mr Johnston said that Mr Kennedy for the plaintiff had said that the plaintiff was entitled to do this pursuant to the Bethco agreement. Mr Johnston said that Dorchester may have had some power to impose such a condition under the Bethco agreement but this could not possibly affect the basis upon which the plaintiff would rollover the Labrador facility. [29] Mr Johnston said there was no basis for linking the two loans, that is the Bethco and the Labrador loans. He noted that there was a special condition in the Bethco loan in the following terms:8. SPECIAL CONDITIONS Acceptance of this loan for $5,735,000 to Bethco Limited is conditional upon the contemporaneous acceptance of the Loans to: - Bethco Limited for $2,536,000 - Labrador Holdings Limited for $1,838,000.[30] It was his essential submission that that condition had relevance only to the acceptance of the letter of offer which had now been superseded by the Roll Over Agreement which the defendant signed. He did not accept what he said was inherent in the plaintiff's position that the linkage of the two clauses survived the execution ofthe Roll Over Agreements. Nor did he accept that the Bethco agreement gave any entitlement to the plaintiff to move against Labrador. Mr Johnston further submitted that the two loans were not linked so as to make available to the plaintiff when dealing with Labrador a power in the contract it had which governed its dealings with Bethco. He said that the conditions had a very limited operation which only applied at the stage where the parties were dealing with acceptances of the loan offers contained in the letter and had no bearing on the loan facilities which were executed later. Dorchester therefore could not cancel the Labrador agreement because of a perceived failure on the part of Bethco to comply with its obligations under its agreement. [31] It was counsel's further submission that the plaintiff's case essentially was that even if it could not rely on the power to require an accelerated issue of titles in the Bethco agreement in the plaintiff's dealings with Labrador, Mr Kennedy had in effect said that the time period within which Labrador could take up the loan agreed to in the Letter of Offer and the Roll Over Agreement had expired and that Dorchester was not obliged to extend the availability period. But Mr Johnston said the loan availability period, which had been extended on a number of occasions, could not simply come to an end by effluxion of time – there had to be an active step taken to bring about the end of the extended availability period and that the plaintiff had to advise of a cut-off date past which the extended availability period would cease. He said this had not been done. He said that as a result of all of these matters Dorchester had no right to refuse to proceed with the loan to Labrador and Dorchester could not charge the establishment fee and the legal expenses. [32] He said that if Dorchester was in breach of its contract, Labrador has claims against it which it can raise as cross-claims and which qualify as equitable set-offs, which would be a defence to the plaintiff's claims. [33] Mr Johnston accepted that, notwithstanding the asserted breaches of contract by the plaintiff, Labrador accepted that it owed the money under the First Loan Agreement but he said that the evidence from Dorchester as to how that sum was made out was not accepted by the defendants. He also said that the breaches ofcontract by Dorchester resulted in Labrador not being able to re-finance and suffering loss as a result. [34] Mr Johnston submitted that the Court had residual discretion not to grant summary judgment in the circumstances of this case. It was not a case where summary judgment should be ordered, for the reasons that he had gone into. [35] It will be seen that the grounds of defence which the defendants advanced before me had moved away from the assertion that the plaintiff had breached the arrangements it entered into with Bethco and that such breach somehow provided Labrador with a defence.Plaintiff's submissions[36] In the course of his clear and helpful submissions, Mr Kennedy said that it now appeared to be the case that Labrador was not seeking to take advantage of alleged breaches of the contract between Bethco and Dorchester as had been the case in the initial exchanges between the parties. [37] He said he did not accept that Mr Johnston was correct in saying that the two loans were not conditional upon one another, but he said that did not matter very much because it was quite clear from the way the parties conducted themselves that the two loans were connected and would be settled together. At no time did Labrador seek to settle its loan independently of the Bethco loan. [38] Mr Kennedy said that as at 22 November 2007 the plaintiff was entitled to cancel or regard itself as excused from further performing the Roll Over Agreement with Labrador because the loan availability period had expired and therefore it did not have to show that Bethco was in default under its agreement. He said that the Roll Over Agreement defined the "available date" as 30 October 2007 or such other date as the lender agreed to in writing. Mr Kennedy said that there had been a number of communications in writing from Dorchester which could be construed as extending the availability date. For example, on 1 November 2007 the plaintiff's lawyer, Mr Sargent, in a letter to the defendants' solicitor said:Dorchester has stressed that this matter must be finalised by close of business Monday 5 November 2007 at the latest.[39] There are a number of other communications which could be construed as extensions but the important one, Mr Kennedy said, was that of 22 November 2007 where Mr Sargent in an email to the defendants' solicitors said the following:Could you also please come back to me on the caveator consent issue. Dorchester wants this to settle today.[40] Dorchester's solicitor was making it clear in that email, Mr Kennedy said, that the availability date was to expire 22 November. Mr Kennedy said that this was the last communication in writing that could be construed as an extension of the availability date and the plaintiff was not obliged to extend the availability of the loan any further past that point. From that time Dorchester was entitled to cancel at its discretion because of the provisions of clause 2.3 of the Roll Over Agreement. That provided, so far as relevant, that the lender would advance the loan to the borrower in one amount on any business day during the availability period and:Failing which the lender may: (e) discontinue drawdown of the loan and, at its discretion, cancel the facility; [41] Nonetheless, Mr Kennedy said, if the lender decided to discontinue the drawdown or to cancel the facility the borrower would still remain liable to pay on demand all fees, expenses and costs payable by the borrower to the lender under the Roll Over Agreement including the extension fee and the lender's legal costs pursuant to clause 2.4 of the agreement. [42] Mr Kennedy said that the defendants' counsel seemed to be submitting that Dorchester did not perform its obligation to make a loan and was in breach and therefore it could not sue the defendants; further that it, Labrador, could have looked for re-financing elsewhere – which in fact it did. Mr Kennedy submitted that if the plaintiff had wrongly terminated the agreement then (which was denied) any remedy available to the defendants was to be placed in the same position as if a contract had been performed in its entirety by the plaintiff. He said that if that had happened, thedefendants would have ended up paying much higher interest rates than what was actually being claimed by the plaintiff from the defendants. [43] In any event, Mr Kennedy pointed out, Labrador had agreed not to set any amount off against Dorchester until Dorchester had been fully paid and that point had not been reached.Summary[44] The defendants' case came down to two main propositions. a) The plaintiff was in breach of the later two agreements and therefore is not entitled to enforce them by claiming the penalty fee sums; b) Because the plaintiff is in breach of the latter two agreements, the defendants have rights of set-off which they can use to resist repayment of the principal sums advanced under the first agreement.Was Dorchester in breach in refusing to proceed with the loan after 22 November?Introduction[45] It seems to be clear that the intention disclosed by the Letter of Offer and the Roll Over Agreement was that if the defendants provided the necessary securities, then they would be able to secure the loan. But the offer was not open-ended. They would have to have completed their obligations within the availability period. [46] The first matter I need to consider is when the loan availability period ended. If it had ended on the 22 November, then Mr Kennedy might well be correct in his submission that the defendants no longer had an entitlement to the loan and that what was required was for the parties to start fresh negotiations, as part of which the plaintiff was perfectly entitled to seek new security arrangements.What was the period within which loan was available?[47] The time within which the loan had to be uplifted was of the essence: see clause 15.1 of Roll Over Agreement. As Mr Kennedy has pointed out in his submissions, the defendants did not take up the loan within the availability period. [48] It is implicit in the defendants' position that they had a contractual entitlement to take up the loan notwithstanding the fact that the loan availability date had passed and that it came down to a simple question of whether or not the contract that the parties entered into contained any provision entitling the plaintiff to call for expedited issue of the Bethco titles. [49] The plaintiff contended that the defendants had no rights in the matter and that they were dependent upon the plaintiff, in effect, agreeing to extend to the defendants something to which the contract did not entitle them to, namely, an extended period in which they could uplift the loan. The plaintiff's position was that whether or not it did so was entirely in the plaintiff's discretion. [50] It was implicit in the plaintiff's position that there had, in fact, been at least one informal extension of the loan availability period. But by the time 22 November 2007 had been reached, the plaintiff's position was that it was prepared to look at extending the loan date, but as the price of so doing, it expected an improvement in the contractual arrangements concerning the Bethco titles issue. [51] It was a notable aspect of the contractual arrangements that even by the date when the defendants signed the Roll Over Agreement, the availability period described in the Roll Over Agreement had already expired a week or so previously. In that circumstance, it is obvious that the parties cannot have intended that the provisions of the Roll Over Agreement should be given effect to in a literal way, because that would mean the loan would have to have been uplifted even before the Roll Over Agreement had been signed. One way in which this difficulty could be overcome would be by a finding that a term could be implied into the loan arrangements which modified the express terms of the Roll Over Agreement.[52] There is a difficulty with taking such an approach to the case before me, however, in that it was not advanced by the defendants at the hearing before me and therefore I have not had the benefit of submissions from either party. However, unless such an approach is adopted, the contractual arrangements literally applied would lead to absurdity. [53] I will therefore examine the issue of whether an implied variation should be engrafted onto the contract and, if so, what it should be. If an extended period of loan availability can be implied, then it might be the position that the defendant was not dependent on the plaintiff agreeing to extend the period on an ad hoc and informal way or upon a variation of contract being entered into. That is, an implied term would potentially provide the defendants with contractual rights, the breach of which could give rise to remedies against the plaintiff.The test for an implied term[54] In New Zealand the courts have generally accepted that the question of implying terms is governed by the authority of BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 16 ALR 363, 376. Any proposed term must meet the conditions that:• It must be reasonable and equitable;• It must be necessary to give business efficacy to the contract , so that no term will be implied if the contract is effective without it;• It must so obvious that 'it goes without saying';• It must be capable of clear expression;• It must not contradict any expressed term of the contract.[55] While there have been reservations expressed about the rigidity of the BP Refinery approach, it will normally be applied where the parties have entered into a formal form of contract such as the loan agreement in this case.Is it arguable that a term should be implied into the contractual arrangments in this case?[56] The defendants were very much dependent upon an extension being granted. Otherwise the process of entering into the Roll Over Agreement was illusory. Unless a term can be implied extending the loan availability date, the alternative position must be that the defendants by entering the agreements incurred obligations to the plaintiff without in return obtaining any enforceable rights. For example, they would become liable for the costs that could be charged to them under clause 2.4 of the Roll Over Agreement in the event that drawdown of the loan did not proceed. They would be liable for the lender's legal costs of preparing the loan documentation. In return, the plaintiff might, but would not be bound to, take steps that would keep the contract alive by granting at least one extension of the period within which the loan was to be available. [57] If there was no certainty that there was going to be an extension of the loan availability period, not only were the defendants engaged in a futile process but they were also allowing time to go by needlessly, during which their liabilities under the first loan, which was in default would continue to mount. [58] These background circumstances and a consideration of the contents of the Roll Over Agreement persuade me that it is reasonably arguable that there should be implied into the agreement some supplementary provision which would deal with the matter of the defendants' entitlement to take up the loan notwithstanding that the availability period stated in the agreement had expired.Possible implied term[59] Again, in the absence of argument, it is difficult to suggest a suitable term. I think it is arguable, though, that the date of 31 October which the agreement expressly fixed was replaced by a requirement that the defendants be ready to take up the loan within a reasonable period after the execution of the loan Roll Over Agreement. [60] In the absence of submissions on the question of what was a reasonable period for the loan to remain open, the Court is faced with some difficulty. Ajudgment as to what would be a reasonable period would be influenced by a number of factors including, first, what steps the defendants had to take to satisfy their contractual obligations to the plaintiff. [61] It is necessary to say a little more about some additional factual aspects of the background to the execution of the loan which bear upon the issue of what would be a reasonable period. [62] Even although the loan facility was signed on 7 November, the plaintiff's requirements for documentation of the loan had been communicated to the defendants' solicitors on 1 November 2007 in the form of a letter which was also emailed to the solicitors. The plaintiff's solicitor, Ms Buchan, sent with the letter of 1 November a total of 7 documents which needed to be executed. These included the Roll Over Agreement and deed of guarantee. Both of these documents were signed 7 November. They were apparently not received back by the plaintiff's solicitors, Brown and Sargent, until 14 November 2007. The letter that Ms Buchan sent also enclosed the following: a) Confirmation of independent legal advice and waiver of independent advice forms; b) Director's certificate for the borrower and company guarantors; c) Trustees' certificate for the trust deed guarantors; d) Insurance memorandum; and e) Copy plaintiff's letter of offer to the borrower. [63] All of the above documents needed to be executed. Ms Buchan also said that not less than two business days prior to settlement date and or drawdown date her firm would need to "receive and approve the following": a) Facility agreement duly executed in duplicate;b) Deed of guarantee and indemnity executed; c) Signed confirmation of independent legal advice endorsed on solicitors-head or confirmation of waiver of independent legal advice signed by each guarantor; d) Director's certificate(s) duly completed; e) Trustees' certificate duly completed; f) Confirmation of insurance for the borrower and the mortgaged/charged properties in terms of the enclosed memorandum; g) Confirmation that there are no arrears of rates in relation to the mortgaged property(ies); h) Confirmation that all special conditions in Dorchester's letter of offer to the borrower had been satisfied; i) Payment of Brown and Sargent's costs; and j) Payment of $200 for disbursements. [64] Although the loan documentation does not appear to have referred to it, the parties also seem to accept that there had to be clarification of the situation relating to a mortgage over a property situated at 92 Kie Kie Road, Hunterville. It appears that the plaintiff had a second mortgage over this property. It further appears that the property was subject to an agreement for sale and purchase, the purchaser under which had lodged a caveat against the title to the property. The plaintiffs were concerned to ensure that the mortgage over the property was varied so as to extend to, and embrace, the guarantor's obligations in respect of the new loan arrangements that were in the process of being finalised. There are other aspects of the mortgage that the plaintiff was concerned about, including the question of whether its existing priority vis-à-vis the ANZ Bank, which had the first registered mortgage should be varied or whether it should remain the same.[65] Much of the work to meet the plaintiff's requirements for settlement and drawdown of the loan were therefore underway some six days before the Roll Over Agreement was formally signed by the defendants. [66] The history of the matter now reveals that some 20 days after the solicitor for the plaintiff sent off the various documents for execution, the steps that the defendants were required to take, and the steps that their solicitors on their behalf were required to undertake, had not been completed. [67] If the reasonable period for uplifting the loan had expired before 22 November 2007, then the plaintiff's position would be vindicated. The consequences of that occurring would be that on the 22nd the plaintiff was free of any obligation to make the loan available. It could, of course, offer to extend the loan period on such conditions as it choose at that point. It would then be for the defendant to decide whether or not to accept the proposed conditions. [68] If the reasonable period was longer, then the defendants might well be able to argue that the time for uplifting the loan had not expired and it was therefore still entitled on 22 November 2007 to insist that the plaintiff perform its obligations as defined in the Letter of Offer and the Roll Over Agreement; and that the plaintiff was in breach of its obligations in declining to make the loan available on at that date, other than on the basis that new contractual terms were to be stipulated. [69] In my judgment, having regard to all the steps that the defendants had to take to organise their securities and generally attend to execution of the documentation, it is arguable that a period of one month from the signing of the loan would not be outside the range of a reasonable period and that the plaintiff was therefore in breach. Without a more detailed examination of the facts and in the absence of detailed submissions it is not possible to come to any firmer conclusion. [70] If that is so, it must also be reasonably arguable that the plaintiff was in breach of the Letter of Offer and Roll Over Agreement by virtue of the fact that it declined to perform its obligations under those agreements on the ground that the time within which the defendants were able to require performance of theagreements, that is the loan availability period, had expired when in fact it may not have expired.Effect that breach had on entitlement to extension fee and release fee under Roll Over Agreement[71] While the plaintiff's prayer for relief claims the amount of $720,863.87 as an undifferentiated sum, at least that component of the claim of $55,125 is attributable to extension and release fees under the Roll Over Agreement. That part of the claim can therefore be differentiated from the part of the claim that relates to principal and interest owing pursuant to the first Loan Agreement. I will discuss the part of the claim that relates to principal and interest owing pursuant to the first Loan Agreement later in this judgment. [72] The defendants' position with respect to the fees part of the claim is that because the plaintiff was in breach of the Letter of Offer and Roll Over Agreement, then it was not open to it to assert its claim for the extension and release fees. The submission in summary was that the plaintiff, not having performed its contract, could not enforce its contract. Because the plaintiff had no entitlement in the first place to claim the extension and release fees, it was not a matter of the defendants being required to frame their defence to this claim as a set-off. Therefore the defendants, in Mr Johnston's submission, had a defence to the claimed amounts for the extension and release fees. [73] The correct approach to the issues that this point raises is to consider whether or not the obligations contained in the contract were interdependent and concurrent. An example of a type of case where they are is a contract for the sale of land where the vendor's obligation to deliver a good title and the purchaser's obligation to pay the purchase are concurrent and mutually dependent obligations in the sense that they are "simultaneous acts to be performed interchangeably": Palmer v Lark [1945] 1 ALL ER 355, 357. In such a case a plaintiff cannot enforce his contract unless he is ready and able to perform his obligations under it. [74] The class of case just mentioned is not the only one where the rule applies. It is also a requirement that a party seeking to enforce a contract should remain readyand willing to perform it in cases where a notice making time of the essence is to be served: Burrows Finn and Todd, at 592 Law of Contract in New Zealand (3rd Ed). [75] Further, in certain cases involving cancellation of contract, a party in breach will not be able to cancel: Noble Investments Limited v Keenan [2006] NZAR 594. But there is no general rule that a party in breach cannot cancel the contract. The operation of the rule is limited to circumstances where recognising a right of a party in default to cancel would be to permit a wrong-doer to take advantage of his wrong- doing. An example is the case where a party who is in breach of the contract is put in the position where he/she could not perform because of the plaintiff's failure to perform his/her obligations. Thus, if a defendant was required to perform an action but was dependent upon receiving a deposit under a contract in order to do so and the plaintiff had not paid the deposit in breach of the contract, then the plaintiff would not be entitled to cancel. [76] The present case does not fall into any of the categories that I have mentioned. The requirement to pay the fee was independent of the obligation to advance the money: the contract says so. [77] Had the defendants cancelled (and the propriety of their actions in so doing later been endorsed by judgment), then it might be possible that they would be found to have been excused from the obligation to pay the fees on the ground that s 8(3) of the Contractual Remedies Act 1979 excused them from further performance of the contract. But cancellation did not occur. The defendants remained liable to perform their outstanding obligations under the contract including the agreement to pay the fees. [78] Therefore, the defendants have no defence to the part of the claim that relates to fees under the Roll Over Agreement. [79] The above conclusion may also have consequences with regard to whether Dorchester was entitled to insist on a continuing entitlement to retain the securities that the defendants had given for the first loan. I consider that aspect of the matter at paragraph [80] and following.Is Labrador entitled to set-off costs incurred due to inability to refinance its loan against Dorchester's claim?[80] As I understand it, the asserted claim of set-off takes the following form. Labrador says that when it became impossible to proceed further with the rollover facility, it made enquiries about obtaining finance elsewhere. However, although Labrador identified a potential source of finance, it could not proceed further with that because Dorchester would not release its security so long as the extension fee and legal fees that it claimed remained payable under the Roll Over Agreement. The defendant says that had it been able to obtain alternative finance it would have had to pay interest at the rate of 16% rather than the 20.5% default rate under the Dorchester contract. Labrador says that it cannot put a figure on what loss it suffered until it has discovery and further particulars of the amounts which the plaintiff claims. Labrador says that the extra cost of interest incurred by it and Bethco is $74,727. [81] The first hurdle that Labrador has to clear is to show that Dorchester was arguably in breach of its contract when it refused to release its security. [82] The mortgage was granted 2 February 2005. It was executed by Labrador and the other defendants – the latter as "convenantors". It seems clear that the terms of the mortgage extended to security for any "moneys which are now or shall hereafter from time to time be owing to the mortgagee". Such an expression is wide enough to embrace the fees which Dorchester claims to be payable. I have concluded elsewhere in this judgment that it remained open for Dorchester to enforce those fees notwithstanding that it was arguably in breach of its contractual obligations. To summarise, I concluded that even if Dorchester had breached the loan contract by prematurely regarding itself as released from further performance of the loan agreement, Labrador has no defence to the claim for the extension fees and release fees. The significance of this is that the Labrador is liable to pay this sum. Further, given the defendants' failure to make payment of the fees, Dorchester, as mortgagee, was entitled to retain and enforce the securities which it had taken from the defendants.The claimed set-off arising from inability to re-finance[83] In Grant v NZMC Limited [1989] 1 NZLR 8, 12 Somers J for the Court of Appeal described equitable set-off in the following terms:The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand. It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.[84] The claim to set-off here is based upon the assertion that Dorchester was in breach in not releasing the securities, which would have enabled the defendants to re-finance at lower interest rates. The conclusion I reached above that Dorchester was within its rights to retain and enforce the securities means that Dorchester did not have any obligation to cooperate with the defendants by discharging the mortgage as a preliminary to re-financing. There is therefore no set-off available to the defendants of the type proposed. [85] Even if the defendants were able to claim that Dorchester was in breach of contract in not agreeing to release the mortgage, that would not advance the position of all the defendants. That is because, as Mr Kennedy submitted, even if it is arguable that the plaintiff breached the Roll Over Agreement and the Letter of Offer, that will not assist the defendants. That is because, pursuant to clause 9.3(b) of the Roll Over Agreement the parties contractually excluded any right of set-off that Labrador might otherwise have been entitled to claim. The provision in question reads as follows:PAYMENTS TO BE FREE AND CLEAR 9.3 Each payment by the Borrower to the Lender under a Related Document is to be made: (a) free of any restriction or condition; and (b) free and clear of and (except to the extent required by law) without any deduction or withholding for or on account of tax or on any other account, whether by way of set off, counterclaim or otherwise.[86] This above provision would seem to affect the present proceedings in the following way. The claim by the plaintiff is brought under the First Loan Agreement so far as the principal and interest claim is concerned. There is also a part of the claim brought under the Letter of Offer and the Roll Over Agreement for the holding fee. There is an additional document that relates to the first loan which should be mentioned and that is the deed of guarantee signed by the defendants other than the first defendant. That deed provided that the guarantors were to be regarded in all respects as principal debtors (clause 7). The deed of guarantee also provided, in clause 4, that there would no right of set-off available to the guarantors. That means that they are liable to meet the obligations under the First Loan Agreement and cannot offset against that obligation any breach of duty (whether contractual or otherwise) owed to Labrador or to themselves by the plaintiff. [87] The First Loan Agreement, though, does not contain a 'no set-off' clause so far as Labrador is concerned. In theory at least, if Labrador had an equitable set-off available to it, it might have been possible to advance that as an answer to Dorchester's claims under the First Loan Agreement. However, because of the conclusions I have reached concerning Labrador's entitlement to retain the mortgage as security for the loan fees, the issue of equitable set-off does not arise.The suggested residual discretion to decline summary judgment[88] The defendants submitted that there were good grounds for the Court declining summary judgment in the exercise of the residual discretion vested in the Court to do so. In considering this aspect of the matter I intend to be guided by the following extract from the commentary to the High Court Rules in McGechan on Procedure:HR136.11 Court's discretion Analysing the above authorities, the position appears to be as follows: (a) The discretion implied by the use of the word "may" in r 136 is to be restrictively applied. In a great majority of cases, once the Court is satisfied the defendant has no defence, there is no room for the exercise of discretion.(b) The residual discretion may be invoked to avoid oppression or injustice to the defendant where: (i) The proceeding involves the actions or possible liability of a third party which is not before the Court; (ii) The proceedings are such that the opportunity should be given to allow discovery or other interlocutory applications to be concluded; (iii) The circumstances of the case disclose very unusual features, the presence of which leads the Court to conclude that the entry of summary judgment would be oppressive or unjust; or (iv) The combination of complex issues of fact and law justify the dismissal of the application for summary judgment, either as a matter of discretion or because the Court cannot be satisfied that the defendant has no defence.[89] The approach that I have taken in this case is to enquire whether there is a reasonably arguable defence. Having given the defendants the benefit of the doubt on the question of whether the plaintiff was in breach of the contract, I have come to the conclusion that, nonetheless, the plaintiff has negatived the existence of any reasonably arguable defence. None of the factors that McGechan notes as possible circumstances in which the discretion can be exercised in favour of the defendant are present here. I do not consider that in the circumstances of this case the entry of summary judgment would work an injustice against the defendants. I have been able to consider the arguments that they have chosen to mount within the conventional framework of a summary judgment application by adopting the approach of whether the plaintiff has negatived any reasonably arguable defence. Having done so, I am not left with any concerns that there is an extra dimension to the case that can only be properly recognised by taking the further step of exercising the discretion to disallow summary judgment. In my view, there is no substance to the submission that the defendants made under this head.Quantum[90] Mr Johnston for the defendants complained that the way in which the plaintiff's calculations of quantum had been set out in the statement of claim and inthe affidavit by Mr Neilson, it was difficult to understand how the plaintiff came up with the figure that it says the defendants owe to it. Mr Johnston said that without discovery, the defendants could not carry out a meaningful analysis of the sums which the plaintiff claims. [91] The plaintiff has, in the usual way, provided verification on oath that the defendant owed the various amounts which the plaintiff claims from them. Very often, in summary judgment claims, the Court is invited to enter judgment for an amount which is arrived at following complex calculations usually done by computer. Given that the plaintiff has taken the serious step of one of its officers stating on oath that the amount claimed is in fact due and owing, the Courts do not attempt to embark upon a detailed examination of the steps followed in carrying out the calculation to test whether the amount claimed is correct. [92] While the present summary judgment application is opposed, in the sense that the defendants have filed a notice of opposition and some affidavit evidence, they have not produced any affidavit evidence which calls into the question the factual accuracy of the calculations. Had they done so, the Court would then be required to analyse the competing contentions, even if only to identify whether there was a seriously arguable defence available on this aspect of the plaintiff's claim. But the defendant has not provided evidence in this case. The defendants have, as I have mentioned, said that they do not accept that the calculations are correct. The plaintiff has set out a credible basis for claiming the various amounts. It does in some detail in the statement of claim and supporting affidavit; it also deposes that the defendants have no defence. Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If the defendant does not do so, the plaintiff's verification stands unchallenged and ought to be accepted unless it is patently wrong: Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54, 59. The defendants need to do more than proffer a bland and generalised refusal to accept that the plaintiff's quantification of the claim is accurate. It is impossible to assess whether their stated belief is correct, given that they do not set out the basis for it in affidavit form. In my view, the Court is able to enter judgment against the defendants notwithstanding their non-acceptance of the accuracy of the calculation of the quantum claimed.Result[93] The plaintiff is entitled to judgment against the defendants for the amounts owing under the First Loan Agreement and in respect of the sums owing under the Letter of Offer and the Roll Over Agreement. [94] I reserve leave to either party to seek directions from me as to the form of judgment which the plaintiff is entitled to enter. The parties should also confer on and resolve the matter of costs. [95] If further directions are required, the party seeking them should file a concise memorandum within 10 working days of the date of this judgment. _____________ J.P. Doogue Associate Judge