Wilfred v Lexington Legal Ltd

• Jurisdiction: New Zealand
• Judge: NATION J
• Judgment Date: 04 July 2016
• Neutral Citation: [2016] NZHC 1469
• Docket Number: CIV-2016-409-000139
• Court: High Court
• Date: 04 July 2016

Between

Harmon L. Wilfred

Appellant

and

Lexington Legal Limited

Respondent

[2016] NZHC 1469

CIV-2016-409-000139

IN THE COURT OF APPEAL OF NEW ZEALAND CHRISTCHURCH REGISTRY

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.

Appearances:

D J Ballantyne for the Appellant

D M Lester for the Respondent

JUDGMENT OF NATION J

1 This is an appeal against a judgment of Judge Neave in the District Court finding Mr Wilfred liable as a guarantor for legal costs incurred by a company of which he was a director with the law firm Lexington Legal Limited. 1

2 Around 3 June 2011, the appellant, Harmon Wilfred (Mr Wilfred), had discussions with Paul Brown, a solicitor of Lexington Legal, in connection with employment-related issues concerning various legal entities Mr Wilfred was involved with. Soon afterwards, Mr Brown sent him a letter of engagement setting out in general terms the basis on which Lexington Legal would accept instructions. With the letter were its standard terms of engagement which were to apply. Those terms of engagement included a clause which said any person signing for a company would be personally guaranteeing payment of the account for that company.

3 On 4 June 2011, Mr Wilfred responded to Mr Brown accepting the terms and conditions for proceeding with the case on behalf of Wilfred Investments, La Famia No. 2 Limited (LF-2 trading as Wigram Manor) and La Famia Foundation NZ.

4 Lexington Legal provided legal services relating to employment issues involving several employees. An interim account for $5,750 was sent to Mr Wilfred on 5 April 2012 and a second interim account for $11,500 on 29 June 2012. These accounts were not paid.

5 The company LF-2 went into liquidation. The company La Famia No. 1 Limited (LF-1) was also the subject of liquidation proceedings. On 3 November 2013, Mr Brown and Lexington Legal sent Mr Wilfred three accounts for a total of $36,534.56. One invoice for $24,994.92 was made out to LF-1 and two accounts for a total of $11,539.64 were made out to LF-2 (in liquidation). Lexington Legal required Mr Wilfred to pay the costs referred to in those accounts as the guarantor of company obligations.

6 The accounts were not paid. On 15 May 2015, Lexington Legal filed a notice of claim in the District Court. Initially, judgment was entered on the basis the response from Mr Wilfred did not disclose any defence. By consent, that judgment was set aside. The proceedings continued on a defended basis without formal pleadings. There was a hearing on 10 September 2015. The Court had documents filed with the original notice of claim and the response by defendant and the earlier application for judgment. Evidence was given orally by Mr Brown and Mr Wilfred. On 9 February 2016, Judge Neave gave judgment for Lexington Legal in the sum of $38,310.20 with costs.

The District Court judgment

7 Judge Neave said no issue had been taken with the reasonableness of any of the fees or the quality of the legal services provided. He said it had been accepted that Lexington Legal had received instructions to act and to perform the services which resulted in the fees in respect of which payment was sought. The Judge found that Mr Wilfred had personally guaranteed payment for the legal services rendered through the way he had confirmed acceptance of the terms and conditions in an email. He held the communications met the requirements of s 27 of the Property Law Act 2007, there having been a signing in terms of the Electronic Transactions Act 2002. 2

8 On 28 March 2014, Lexington Legal had sent a letter to solicitors then acting for Mr Wilfred attaching credits for the three invoices which had previously been supplied, at the same time advising that it was pursuing Mr Wilfred under the terms of the letter of engagement where he accepted personal liability for the debts of the companies. Judge Neave held those credit notes did not extinguish the liability which Mr Wilfred had as guarantor. Judge Neave held there was no evidence of the defendant making any mistake such as would provide a defence under the Contractual Mistakes Act 1977. He also held the plea of non est factum had not been made out. There was no evidence as to any mistake as to the terms of the contract and no evidence to suggest Mr Wilfred was misled as to the terms of the contract. He held that all arguments raised by the defence were unsuccessful, entitling Lexington Legal to judgment. 3

Approach on appeal

9 This is a general appeal by way of rehearing. 4 This Court must reach its own conclusions on the merits. It need not defer to the Judge at first instance. 5 Although the Court will recognise the advantage the Judge had in seeing witnesses and hearing evidence, that is not of major significance in this case given there was little contested evidence and no real issues of credibility.

10 I will deal with the underlying merits of each party's position against the evidential record through considering each ground of appeal as advanced by Mr Ballantyne for Mr Wilfred.

Ground One—The Judge erred in principle by implicitly placing weight on findings that were not in evidence and which were irrelevant to the issues before the Court

11 It was submitted the Judge erred by placing weight on findings that were not in evidence and which were irrelevant to the issues before the Court. In an introduction to his decision, Judge Neave had recorded that Mr Wilfred was ‘involved in a group of companies and trusts which became embroiled in disputes and litigation centring around the operation of a property at Wigram in Christchurch’. 6

12 The Judge was setting out, in only a general and imprecise way, the background to Lexington Legal's involvement and the work they had to do.

13 His summary was not unreasonable given that in the letter of engagement, following the initial discussions between Mr Brown and Mr Wilfred, Mr Brown had summarised the general nature of the services Lexington Legal anticipated providing as follows:

Services to be Provided:

The following is a summary of the legal services I expect to be providing to you:

• • Advice on your best options to defend a personal grievance against Wigram Manor, including:

• • Representing you at mediation at the Employment Relations Service.

• • Representing you at the Employment Relations Authority, should there be an Investigation

• • Representing you at the Employment Court, should there be an appeal.

• • Assistance, if requested, with providing proof of the various losses, to assist the Police and to form the basis of a claim against the former Employees.

• • Any other matter arising out of the personal grievances, if requested.

14 In confirming that Lexington Legal was to provide legal services on the terms outlined, Mr Wilfred stated that, in relation to those matters, the services were to be provided to Wilfred Investments Limited, LF-2 and La Famia Foundation NZ.

15 The disputes related more to employment issues rather than ‘a property at Wigram’. I was told Wigram Manor was the trading name for LF-2 but also the name given to the property at the former Wigram Airforce Base in Christchurch from which Mr Wilfred conducted the businesses with which he was associated. Any inaccuracy over that did not materially affect the correctness of the decision Judge Neave ultimately came to. The work which Lexington Legal required Mr Wilfred to pay for was work with which Mr Wilfred had been personally involved so he knew what the costs related to. It had been summarised in a general way in the invoices which had been issued. Judgment was given on the basis of the costs which had been incurred as outlined in those invoices. It is also on that basis I consider whether there was a liability for legal fees, which Mr Wilfred could be liable for as guarantor.

16 Mr Wilfred, through his counsel, also criticises the Judge for proceeding on the basis there was no dispute as to the reasonableness of the fees or the quality of the legal services provided.

17 In that regard, Mr Wilfred refers to a letter dated 25 October 2012 sent by a Ms Smalley on behalf of LF-1. That letter was sent after Lexington Legal had issued to Mr Wilfred the interim account dated 5 April 2012 and 29 June 2012, for $5,750 and $11,500 respectively. The letter suggested LF-1 needed more detail to determine how the invoice would be applied and that some of the billing would ultimately be to the Foundation, some to...