Dwa Ltd v Mark Anthony Andrew Gillam

• Jurisdiction: New Zealand
• Judge: Matthews
• Judgment Date: 27 July 2012
• Neutral Citation: [2012] NZHC 1875
• Docket Number: CIV-2012-409-000440
• Court: High Court
• Date: 27 July 2012

BETWEEN

Dwa Limited

Plaintiff

and

Mark Anthony Andrew Gillam

First Defendant

Karen Gayle Gillam

Second Defendant

New Zealand Trustee Services Limited

Third Defendant

[2012] NZHC 1875

CIV-2012-409-000440

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

Application for summary judgment against defendants as guarantors — plaintiff sold its business and advanced money to the purchaser which was guaranteed by the defendants — pending application to place purchaser in liquidation — purchaser argued it had a claim in relation to the value of the stock purchased — whether guarantors were entitled to rely on purchaser's set-off in proceedings against them as sureties alone — whether proceeding should be adjourned pending outcome of vendor's application liquidate purchaser.

Appearances:

G D Jones for Plaintiff

H A Evans for First Defendant

B R D Burke for Second Defendant

K T Dalziel for Third Defendant

RESERVED JUDGMENT OF ASSOCIATE JUDGE Matthews

Matthews

1 In April 2011 the plaintiff (DWA) sold its business to the first defendant or his nominee for approximately $3,300,000 (subject to stock valuation). At that time DWA was called Enersave Products Limited. On 20 May 2011 an agreement was executed by Enersave Products Limited, Riccarton Lighting & Design (2004) Limited as the nominated purchaser, and each of the three defendants. This agreement varied the terms of the sale and purchase contract by providing for DWA to advance $400,000 to Riccarton Lighting & Design (2004) Limited as part of the purchase price and for this advance to be guaranteed by all of the defendants.

2 In this proceeding DWA seeks summary judgment against each of the defendants, as Riccarton Lighting & Design (2004) Limited has defaulted in repayment of the advance of $400,000.

3 The guarantee is in the following terms:

3.9 Guarantee

• (i) In consideration of the Vendor entering into and acting in accordance with this Agreement, the Guarantor (as principal obligor and not merely as a surety) unconditionally and irrevocably guarantees as a continuing obligation payment of the Vendor Loan by the Purchaser and shall pay to the Vendor on demand any sum of money that the Purchaser shall at any time become liable to pay to the Vendor in respect of the Vendor Loan and which has not been paid at the time demand is made.

• (ii) The obligations of the Guarantor pursuant to this clause shall be continuing obligations and shall not be satisfied, discharged or impaired by any act or omission or any other events or circumstances whatsoever (whether or not known to the Vendor, the Purchaser or the Guarantor) which would or might (but for this clause) operate to satisfy, impair or discharge any of the Guarantor's liability hereunder including, but without limitation:

  • (b) any release of or granting of time (or any other indulgence) to, the Purchaser or any other person; or

  • (c) the existence, validity, taking or renewal of any other security, right or remedy taken by the Vendor in relation to this Agreement or any enforcement of, neglect to perfect, failure to enforce or release or waiver of any such security, right or remedy; or

  • (d) any amendment to or variation of this Agreement or any security relating thereto or any assignment of this guarantee or any such security; or

  • (e) any legal limitation, disability, incapacity or other circumstance relating to the Vendor, the Purchaser, the Guarantor or any other person; or

  • (f) any change in the name or constitution of the Purchaser (or its successors or assigns) or its absorption by or amalgamation with any other undertaking; or

  • (g) any irregularity, unenforceability or invalidity of any obligation of the Vendor, the Purchaser or any other person under or pursuant to this Agreement so that the obligations of the Guarantor hereunder will remain in full force and effect and this guarantee will be construed accordingly as if there were no such irregularity, unenforceability or invalidity.

• (iii) This guarantee is a continuing guarantee and will remain in full force and effect until the obligations and liabilities of the Purchaser under or arising out of (or in connection with) the Vendor Loan have been fully performed or discharged.

• (iv) Any release, compromise or discharge of the obligations of the Guarantor shall be deemed to be made subject to the condition that it will be void if any payment or security which may be or has been received by the Vendor is set aside or proves invalid for whatever reason.

• (v) As a separate, continuing and primary obligation, the Guarantor undertakes to indemnify the Vendor on demand against all losses, claims or costs suffered or incurred by the Vendor while acting in good faith should any amounts which would otherwise be due under the Vendor Loan not be recoverable for any reason whatsoever including (but not limited to) the Vendor Loan being or becoming void, voidable or unenforceable.

4 In addition the agreement provided:

7 Limitation of Liability of Independent Trustee

New Zealand Trustee Services Limited has entered into this Agreement as an independent trustee of the Mark and Karen Gillam Business Trust and accordingly the liability of New Zealand Trustee Services Limited shall be limited to the assets under the control of New Zealand Trustee Services Limited in respect of either Trust.

5 No explanation was given for the presence of the word “either” in this clause and argument proceeded as though it were not there, and the final phrase of this paragraph read “in respect of the Trust”.

6 The principles applying to entry of summary judgment are well-established, and not in issue. Judgment may be given for a plaintiff if the plaintiff satisfies the Court that the defendant does not have a defence to the claim. Although the onus of establishing this position is placed on the plaintiff, where a specific defence is raised it is for the defendant to lay an evidentiary foundation for that defence. The defendants must demonstrate a tenable defence. However, the onus remains on the plaintiff to satisfy the Court that there is no defence to the claim. 1 Where evidence by affidavit conflicts the Court will not normally attempt to resolve the conflict, though the Court is not bound to accept, uncritically, as raising a dispute of fact every statement of fact, however equivocal, lacking in precision, inconsistent with

undisputed contemporary documents or other statements by the same deponent or inherently improbable in itself it may be.2

7 Rule 12. 2 provides that the Court “may” enter judgment if satisfied that a defendant does not have a defence to the claim. This leaves the Court with a discretion, though it is accepted that it is a discretion of very limited scope: Berg v Anglo Pacific International (1988) Ltd. 3

8 At the beginning of the hearing application was made for leave for the first defendant to file a supplementary affidavit. Counsel informed me that although at the outset all defendants were represented together, as preparation for the case had proceeded, counsel had recognised that there were potential conflicts of interest between the three defendants and each would need separate representation. This had resulted in his reviewing the evidence initially filed for the first defendant and forming the view that it was not sufficiently comprehensive.

9 Leave was opposed by the plaintiff. I proceeded with the hearing after reserving my decision. No party sought to adjourn, though Mr Jones initially indicated that would be his preference and only elected to proceed when faced with the prospect that a further fixture could not be allocated for perhaps three to four months. I reserved my decision at that point and having reflected on the matter, now consider it to be in the interests of justice that the affidavit is admitted.

10 There is a dispute between DWA, as the vendor, and the purchaser of the business as a result of which the purchaser maintains that it has a claim against DWA in relation to the value of stock purchased as part of the business. When DWA issued a demand for repayment of the advance of $400,000, the purchaser, which by then had changed its name to Enersave Products Limited (Enersave) to take advantage of the goodwill purchased with the business, applied to set aside the demand. The Court rejected the application as the applicant had not shown that the quantum of its alleged cross claim exceeded the amount claimed.

11 Neither the vendor nor the purchaser has issued proceedings against the other to establish the extent of liability between them. The notice under s 289 Companies Act 1993 expired with the result that the purchasing company is presumed to be unable to pay its debts, pursuant to s 287. DWA has issued proceedings for appointment of a liquidator of Enersave. Enersave is defending the application. It has filed a statement of defence and a fixture for argument is pending.

12 DWA's position is straightforward. It claims the unpaid portion of the purchase price pursuant to the guarantees. It specifically relies on the wording of the guarantee which provides that each guarantor is a “principal obligor and not merely as a surety” and the terms of cl 3.9(ii) as set out above. In relation to the third defendant it acknowledges the limitation on its liability set out in cl 7 but maintains it is entitled to enter summary judgment for the full amount of the unpaid advance, with the limitation on liability to the assets of the trust being relevant only to the extent to which judgment can be satisfied.

13 All the defendants maintain that as guarantors they are not liable to pay any sum greater than the principal debtor is obliged to pay, and that there is a substantial dispute between DWA and Enersave over the liability of Enersave to pay the debt,...