New Zealand Credit Law Bulletin - Vol 6, No 6, October 2006
A free, plain English review of recent law and items of interest for creditors, produced by Hattaway & Associates Ltd, Credit Consultants. To subscribe send a blank email to: nz-bulletin-join@mailman.hattaways.com
Plain language disclaimer:
This bulletin is not legal advice. Do not make decisions on legal matters based on a brief commentary. Instead, get professional legal advice.
In this issue:
- Insolvency practitioner faces ongoing attack on website and in the courts
One for John Grisham to use for the plot of his next book - The unfortunate consequences for a lender of not getting forms signed
But Human Rights Tribunal finds no Privacy Act “harm” done to the individual - Appeal to High Court over $385 of rejected benefit claims!
What is the world coming to? - Credit card co talks to warehouse staff about manager’s salary
Not the right thing to do from a privacy perspective - Who bears the legal costs when an application to wind up a company is withdrawn by the creditor?
Creditors beware!
1. Insolvency practitioner faces ongoing attack on website and in the courts
On 8 April 2005 Michael Stiassny and insolvency practitioners Ferrier Hodgson became aware that a very large billboard had been erected on the building known as the old Farmers Carpark in Hobson Street, Auckland. The billboard had a photograph of Stiassny with the text: Michael Stiassny A true story.
(It also included the address of a website which, in the circumstances, we won’t publicise.) The website had been registered by Mr Siemer, who had also been responsible for the erection of the billboard. Seimer was involved with a company called Paragon Services Ltd (previously Paragon Oil Systems Ltd) which Stiassny had been receiver of in 2000 and 2001. Stiassny and Ferrier Hodgson looked at the website and concluded that the contents were defamatory. They obtained a court order requiring the removal of the billboard and the removal of all material relating to them.
Siemer applied to have the injunction rescinded. Instead, a replacement interim injunction on more restricted terms was ordered. He appealed to the Court of Appeal and lost. He had continued to breach the injunction by allowing the website to continue, so contempt proceedings were issued by Stiassny and Ferrier Hodgson.
See Ferrier Hodgson and Anor v Siemer and ors HC AK CIV 2005-404-1808 [2006] NZHC 238 (16 March 2006)
The judge in that case described the matter as one where the deliberate and systematic breaches of the injunctions created real prejudice to the administration of justice. He fined Siemer and Paragon Services Ltd $15,000. In a costs decision on 2 June 2006, it was reported that Stiassny and Ferrier Hodgson had paid legal fees of $180,182.78 plus disbursements of $3,386.00 (all of which Siemer and Paragon were ordered to pay.) Seehttp://www.nzlii.org/nz/cases/NZHC/2006/624.html
Stiassny had filed an affidavit in support of the application for the initial court order. In the latest case in this saga, Siemer sued for damages, alleging that in his affidavit Stiassny “knowingly perjured himself.”
However, the courts will not allow anyone to sue a witness for defamation for anything said in an affidavit for a court case. The policy behind the rule which gives this immunity to a witness is that the court wants to know the full facts, and witnesses should be able to “speak frankly and fearlessly without the risk of being sued for what they say.”
The judge concluded that Siemer’s causes of action could not succeed and should be struck out.
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2. The unfortunate consequences for a lender of not getting forms signed
Herron v Speirs Group Ltd [2006] NZHRRT 12 (30 March 2006)
In June 1997 Mr Herron filled in and signed two forms in relation to the purchase of a Holden ‘Equipe’ from Davies Motors Limited. The purchaser was Agricultural Technologies Limited (‘ATL’). The price of the car was $37,025.00, all of which was to be financed by Speirs Group. Herron filled in the credit application on behalf of ATL and said that he was to be the contact person at ATL. He said he was a director and shareholder. In fact, Herron was not a director or a shareholder of ATL. In his evidence, he said that at the time he intended to become a director and shareholder of ATL, although ultimately he never did so. There is no evidence that he ever made his true position clear to Speirs at the time.
The credit application gave no financial information about the company. Herron filled in a separate two-page credit application giving his own personal details, and a statement of his financial position which showed himself as having a net worth of over $2.4 million.
There was a box at the foot of the first two application forms relating the possibility of a guarantee. It was crossed out by Mr Herron. However, Speirs clearly expected Herron to guarantee the transaction, as is shown by the formal documents which included a guarantee from him. Speirs sent the documentation to the car dealer together with a list of its requirements for settlement. It included the words, "... if appropriate, don’t forget the guarantor’s signature".
The car was picked up but it appears that no documents that had been signed either for ATL or by Mr Herron were ever returned by the dealer to Speirs.
The Human Rights Review Tribunal said, “We have no doubt [Speirs] was expecting his guarantee. On the other hand, there is no evidence that he ever did sign a guarantee. Perhaps he did, and the document has since been lost. Perhaps the dealer omitted to comply with the defendant’s requirements for settlement, and did not get any documents signed at all. All that is clear is that, if Mr Herron ever did sign a guarantee, nobody has been able to find it.”
A guarantee which is not in writing cannot be enforced.
When payments were missed, Speirs sent appropriate notices to the Herron and ATL addresses. Herron said he never received any.
On 20 November 1998 the car was re-possessed. It was sold by the defendant in December 1998. After all expenses had been taken into account, ATL still owed Speirs $10,967.
Herron didn’t pay the shortfall so on 17 March 1999 Speirs listed what it saw as Herron’s ‘default’ on the Baycorp database.
Baycorp already held information about Herron including his name and address, a list of companies of which he was or had been an officer, a list of previous inquirers seeking information about him, and a list of two court judgments against him. There was also reference to a collection agency default and two other collections (all three of these were shown as ‘paid’).
By July 1999, Speirs knew that it did not have any signed documents to support the transaction, and that this might make legal action difficult. It told its debt collectors to cease legal action against Herron.
In March 2000 (though the dates are somewhat confused) Herron found out about the default notification on the Baycorp database. He was,
he said, extremely angry. He said that a mortgage broker he was dealing with at that time would not take his application for funds to any of the High Street banks, as it was clear that it would be turned down. Mr Herron said that the notification stopped him from raising funds in his own name and that, from that time onwards, he did not borrow any money. He said the notification basically meant he could not continue his business.
However, Baycorp records show no searches prior to Herron finding out about the default on the database which would have meant he was turned down for finance, “or suffered any adverse consequences of any kind.”
The Tribunal expressed surprise that he didn’t appear to have done anything at this point to have the default notice removed prior to a letter written by his solicitors to Speirs in October 2000. There was some correspondence between the defendant and Herron’s solicitors after that but “there is nothing that conveys the sense of anger, urgency or significance that Mr Herron purported to give the matter in his evidence to the Tribunal.”
There were some 15 credit checks made after Herron became aware of the listing on Baycorp (February 2000 to November 2004). The Tribunal took note of the fact that there was “no evidence that relates any of these checks to any specific instance on which Mr Herron says he suffered adverse consequences.”
In 2002, 14 months after he became aware of the problem, Herron complained to the Privacy Commissioner.
In 2003, while the Privacy Commissioner was still investigating the matter, Herron filed proceedings in the Human Rights Tribunal. The Privacy Commissioner decided to discontinue his investigation, apparently because Herron’s solicitors’ failure to respond “signalled to the Privacy Commissioner that Mr Herron did not really wish to pursue the matter.”
Herron settled with Baycorp. The claim against Speirs was eventually heard by the Human Rights Tribunal.
Principle 8 of the Privacy Act says that an agency [here Speirs] can’t use personal information “without taking such steps (if any) as are, in the circumstances, reasonable to ensure that, having regard to the purpose for which the information is to be used, the information in accurate, up to date, complete, relevant, and not misleading."
Speirs did not have a guarantee that it could enforce, or any evidence that the guarantee had been signed. The Tribunal said that, “We think that when the defendant notified Baycorp that Mr Herron was in default of an obligation said to be owed to it, the notification was incomplete, inaccurate and misleading. …The information did not meet the standard required by Principle 8, and there is no evidence that any steps were taken to see that it did.”
However, it must also be shown that Mr Herron has suffered harm or adverse consequences. The Tribunal had some problems with Herron’s evidence of adverse consequences. It was “in parts obviously overstated, and in other respects it was vague to the point of being almost meaningless.”
In essence, the Tribunal said that if his situation was as dire as he suggested, why wasn’t he clearer on the details of the matter and why didn’t he take serious steps to do something about it immediately. “In our assessment the fact that Mr Herron was incapable of remembering when and how he first found out about the listing, and his inability to place the event within anything more accurate than an 18 months to 2 year time frame, significantly undermines the credibility of what he told us.
In respect of one deal which Herron said fell through as a result of the listing, the Tribunal said, “if Mr Herron was capable of recognising a commercial opportunity, seeing it through the process of obtaining resource consents and negotiating for a joint venture that could yield returns in the order of $9 million (with a share to him in the order of $1.5 million), we feel confident he could have worked out a better and more efficient way to have dealt with the default listing than to simply leave it sitting on the Baycorp records.”
The Tribunal concluded that, “Mr Herron has failed to establish that he has suffered harm of any of the kinds listed [in] the Act… The claim must be dismissed.”
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3. Appeal to High Court over $385 of rejected benefit claims!
This was an appeal from a decision of the Social Security Appeal Authority over the fact that the Ministry Of Social Development declined three of Mr Atanasovski’s applications. They were for a special needs grant of $120 for food on 1 July 2003, an advance payment of benefit of $125 for outstanding medical costs on 11 August 2003, and a special needs grant of $140 for food on 11 August 2003.
Atanasovski appeared for himself before the court. For reasons I won’t bother going into, he lost. What is the world coming to when something like this can be appealed to the High Court?
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4. Credit card co talks to warehouse staff about manager’s salary
CASE NOTE 85737 [2006] NZ PrivCmr 9 (1 June 2006)
A business manager applied for a personal credit card. The manager advised the credit card company that it could contact the pay clerk at the business’ head office (which was overseas) to verify the salary information that he had provided.
Instead, the credit card company phoned the New Zealand premises, told one of the warehouse staff, who answered the phone how much the manager said he earned, and for confirmation. The manager complained to the Privacy Commissioner.
The credit card company admitted that it was in the wrong.
Section 66 defines actions for which redress can be obtained under the Privacy Act through the complaints processes. It calls them “interferences with privacy”. Section 66(1) states that there will be an interference with the privacy of an individual where there is an action that breaches one of the information privacy principles and results, or may result, in an adverse consequence for the complainant. Section 66(1)(b)(iii) provides that the adverse consequence may be significant humiliation or loss significant loss of dignity.
The manager stated that he was “very humiliated by the disclosure.” He felt that the credit card company’s actions had undermined his authority.
The commissioner agreed that this “would be seriously humiliating. Salary information is generally viewed in New Zealand as being highly sensitive. In this case, I was satisfied that the disclosure had resulted in significant humiliation and loss of dignity for the manager.”
After receiving the commissioner’s provisional opinion that there had been “an interference with privacy”, the credit card company offered monetary compensation. The manager accepted the offer and that was the end of the matter.
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5. Who bears the legal costs when an application to wind up a company is withdrawn by the creditor?
Ti Rakau Drive Limited served a statutory demand on TNT Materials Handling Pty Limited. TNT Materials Handling applied to set aside the statutory demand, but failed because it was outside the time specified in s 290 of the Companies Act 1993 (within 10 working days of the date of service of the demand). The application to set it aside was therefore withdrawn and costs in relation to this were awarded against TNT Materials Handling.
Ti Rakau then applied to have TNT Materials wound up. TNT Materials Handling applied to restrain advertising and sought a stay of the winding up proceeding but didn’t file affidavits in support. It was only on the third time the matter came up in Court that the lawyers for Ti Rakau confirmed that the whole thing could be struck out. (Presumably there had been some discussions between the companies and a resolution had been reached, although there is nothing in the case report about this.)
They then went back to court, with both sides seeking costs. TNT Materials Handling had not complied with the Court Rules in failing to file its affidavits, causing two extra appearances in court by Ti Rakau’s lawyers, and therefore, could not seek costs in respect of this part of the matter.
However, because Ti Rakau had chosen not to proceed, it was liable to pay costs.
The judge said, “the plaintiff company has elected to issue proceedings at least with some knowledge that there would be a challenge to those proceedings. It has elected to proceed no further with those proceedings… The defendant is… entitled to costs.” He ordered Ti Rakau to pay TNT Materials Handling lawyer’s fees of $2,610 plus court costs as fixed by the Registrar.
Creditors bringing winding up applications in cases where they know the debtor company will challenge the matter should take note.
