Wilfred v Lexington Legal Ltd

JurisdictionNew Zealand
CourtHigh Court
Judgment Date04 Jul 2016
Neutral Citation[2016] NZHC 1469
Docket NumberCIV-2016-409-000139

[2016] NZHC 1469



Harmon L. Wilfred
Lexington Legal Limited

D J Ballantyne for the Appellant

D M Lester for the Respondent

Appeal against a District Court (DC) finding that the appellant was liable as a guarantor for legal costs incurred by a company of which he was a director — the guarantee clause was contained in the law firm's terms and conditions for the provision of service and required the person signing on behalf of the company to give a personal guarantee — the appellant accepted the terms and conditions an instructed the firm to do work for three companies the appellant was involved with — the signature block referred to the appellant as a trustee of one of the entities he was involved with — the firm mistakenly addressed one of the invoices to a company which had not been involved in the transaction — credits were issued for invoices to another company — whether the DC erred by finding that the appellant had agreed to answer personally for the debts all the companies — whether the June constituted a signed acceptance of the guarantee pursuant to s27 Property Law Act 2007 (contract of guarantee in writing and signed by guarantor), there having been a signing in terms of s22 Electronic Transactions Act 2002 (Legal requirement for signature) — whether a presumption should be applied to the email that the appellant had signed in his capacity as a trustee — whether the Judge erred in deciding the credit notes did not discharge the liabilities of the principal creditors and consequently his liability as guarantor; — whether the Contractual Mistakes Act 1977 applied — whether a defence of non-est factum had been made out.

The issues were: whether the Judge erred by finding that under the contract of guarantee, W agreed to answer the debts of both LF1 and LF2; whether the June email constituted a signed acceptance of the guarantee pursuant to s27(2) PLA; whether a presumption should be applied to the email that W had signed in his capacity as a trustee; whether the Judge erred in deciding the credit notes did not discharge the liabilities of the principal creditors and consequently his liability as guarantor; whether the Contractual Mistakes Act 1977 applied; whether W had made out a defence of non-est factum.

Held: The Judge did not place weight on findings that were not in evidence. He was setting out, in only a general and imprecise way, the background to Lexington Legal's involvement and the work they had to do. His summary was not unreasonable given that in the letter of engagement, following the initial discussions between B and W, B had summarised the general nature of the services was to provide in accordance with W's statements that the services were to be provided to Wilfred Investments Limited, LF-2 and La Famia Foundation NZ.

The letter that W relied on to show concern over fees could not be read as a complaint as to the reasonableness of the fees. Correspondence between B and W, suggested that W and the businesses faced cash flow problems which B had recognised. There was no record of any complaint at the time as to the reasonableness of the fees. The Judge entitled to proceed on the basis there was no dispute as to the reasonableness of the fees. The fees which Lexington Legal sought to recover were reasonable fees and costs for the work that Lexington Legal did.

In relation to the incorrect invoice sent to LF-1, the Judge could reasonably have concluded on the basis of that evidence that LF-1 had been invoiced in error and LF-2 should have been invoiced. The Judge was entitled to proceed on the basis that La Famia had incurred a liability for those costs. The record however showed it had not been invoiced for them.

The Judge was clearly aware that, for W to be liable on a guarantee, a debt had to have been incurred by a principal debtor to which any guarantee would relate. He clarified just what companies and trust were covered by any guarantee through W's letter of acceptance of the terms and conditions. The Judge made no error in that regard. The invoice issued to LF-1 was for services that had been provided to LF-2 and the costs as recorded in that invoice were costs for which LF-2 was liable. It was on that basis he held those costs were covered by the guarantee. Liability on the guarantee was not conditional on LF-2 having been invoiced for the costs. It was not dependent on an invoice being issued for that work. LF-2 was thus the principal debtor for those costs. If W had guaranteed payment of those costs, Lexington Legal was entitled to sue him for those costs, even if no invoice had been issued for them.

The terms of engagement stated if the client was a company or body corporate then the person signing these terms personally guaranteed payment of the account. If the client was a trust then each of the trustees (jointly and severally) were personally liable to pay the invoices. This guarantee would be a continuing guarantee, not be discharged by the settlement of account. The clause put W on notice that, if he signed the acceptance of those terms and conditions on behalf of a company, he would be personally guaranteeing the liability of that company for costs it incurred in obtaining the legal services which it sought from Lexington Legal. That was consistent with the way in which W and B dealt with each other over the initial engagement and the problems that arose over costs later on.

There was a written contract in place when W accepted the terms of engagement as set out in Lexington Legal's initial letter and associated terms of engagement. Lexington Legal's letter did not specify by name the particular legal entities it might be acting for in accepting instructions from W. W confirmed acceptance of the terms and conditions and specified the legal entities who would be the clients but, through his June email, accepted the terms and conditions on which they would be the principal debtors.

If W's email was just a counter-offer, then it was a counter-offer that incorporated the terms of engagement which he had accepted. Those terms of engagement and his email recorded in writing the terms of the guarantee. That counter-offer was accepted through Lexington Legal continuing to do the legal work W required from it.

The June email was in the first person with the sender saying “I agree with your terms and conditions” and “I look forward to working with you”. It concluded “best regards — Harmon”. He was further identified below as Harmon L Wilfred, Trustee La Famia Foundation NZ. Harmon Wilfred had identified himself as the signatory and had signed his acceptance of the terms and conditions, including the guarantee clause, for the companies and trust he had named, including LF-2.

W's name or parting address were a “sign-off”, appended with the intention of being bound by marking the document with this electronic signature. Positioned as it was, following W's explicit agreement with Lexington Legal's terms and conditions, the signature was intended to (and did) govern the document as a whole (Welsh v Gatchell). The email objectively indicated W's acceptance of Lexington Legal's terms and conditions. The legal requirement for his signature, required by the PLA and the guarantee clause itself, was met with this electronic signature.

It was quite clear in the circumstances of this case that any presumption that W was signing just on behalf of that particular trust was displaced by the wording of the email itself, the letter of engagement and the terms of engagement to which it referred and the whole context in which W engaged Lexington Legal. The email was from W personally.

W had guaranteed payment of the costs for which LF-2 was liable.

A guarantor was discharged if the creditor unconditionally released the principal debtor without the guarantor's consent. In this case, there had been no unconditional release of the principal debtors (the companies and trust) by Lexington Legal. The credit notes did not extinguish the underlying obligation to pay fees; they were merely cancellations of invoices. Accordingly, none of the rationales underpinning this rule of discharge applied to prejudice W and he remained personally liable. W's obligation to meet Lexington Legal's costs arose whether an invoice existed or not.

While appending the “credits”, B's letter explicitly stated Lexington Legal's intention to pursue W for the debts of the debtor companies. Even if these credits were viewed as a covenant not to sue the La Famia companies and trust, W was not discharged from his personal liability. Nothing in Lexington Law's conduct as creditor warranted the release of W as guarantor.

There was no evidence from W as to his making a mistake or proceeding on that basis. It was not suggested that B knew W had engaged Lexington Legal on the basis of such a mistake. W had no defence under the Contractual Mistakes Act. Even if there was a qualifying mistake, there was no evidence that this influenced W to enter the contract. The requirement for a personal guarantee from W as the person signing on behalf of LF-2 was clearly set out in the terms and conditions. W acknowledged that he had read the terms and conditions. He was an experienced businessman, involved with what seemed a rather complex web of companies and a trust. He understood the terms and conditions.

The requirements of a successful non est factum plea were strict. Signatories had to make it clear that the document was being signed only on behalf of the company, and not in a personal capacity. The capacity in which the person signed was to be derived from the document itself and not from the intention of the parties. The intention of the guarantor in signing was irrelevant. The scheme of the document as a whole and the place where it was signed or witnessed may mean that a...

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