All Metals Trading Company Limited v Wright - [2014] NZHC 2136

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-00974 [2014] NZHC 2136

BETWEEN
ALL METALS TRADING COMPANY

LIMITED Plaintiff

AND

HADLEY JOHN WRIGHT Defendant

Hearing: 29 August 2014

Counsel:

P Dalkie for Plaintiff
K Glover and C Hallowes for Defendant

Judgment:

5 September 2014

JUDGMENT OF ASSOCIATE JUDGE SMITH

Introduction

[1] The plaintiff applies for summary judgment on a guarantee given by the defendant in respect of rent and outgoings payable in respect of certain premises owned by the plaintiff at Alfred Street, Onehunga. The lessee was a company called Wire by Design Ltd (Wire). The lease was for a term of 3 years commencing
1 December 2010, and provided for annual rent of $364,000 per annum plus GST.

[2] There were three guarantors, the defendant Mr Wright, and two companies with which Mr Wright was associated, namely Eagle Wire Products Ltd (Eagle) and Tawil Holdings Ltd (Tawil).

[3] The guarantee is contained in an Agreement to Lease dated

1 December 2010. It is in the following terms:

The guarantor (and if more than one jointly and severally), in consideration of the landlord entering into this Agreement at the guarantor’s request, agrees with the landlord to guarantee to the landlord the obligations of the tenant and to sign the lease as guarantor.

ALL METALS TRADING COMPANY LIMITED v HADLEY JOHN WRIGHT [2014] NZHC 2136 [5
September 2014]

[4] An additional cl 8 provides that “the guarantee of [the defendant] shall be limited to 12 months rent and outgoings”.

[5] Clause 4 of the Agreement to Lease provided for the parties to enter into a formal lease in the Auckland District Law Society’s standard form. It appears that no lease was ever executed, but the tenant went into possession of the premises and payments of rent were made. The plaintiff relies on cl 4.3 of the Agreement to Lease, which provides:

Notwithstanding that the lease may not have been executed the parties shall be bound by the terms, covenants and provisions contained in the Agreement and in the Lease as if the Lease had been duly executed.

[6] The first six months’ rental was secured by a guarantee provided by New Zealand Transport Agency (NZTA), pursuant to arrangements made following the compulsory acquisition of a property which one of Mr Wright’s companies had been occupying in Stoddart Road, Mount Roskill.

[7] Wire fell into default with payments under the Agreement to Lease, and it was placed in receivership on 9 May 2012.

[8] The plaintiff says that a total of $405,577.01 is outstanding for rent and outgoings under the lease. It has pursued liquidation proceedings against Mr Wright’s co-guarantors, Eagle and Tawil, but no recovery has been made from them. Both are now in liquidation.

[9] Mr Wright opposes the application for summary judgment. He acknowledges that he provided a personal guarantee, but says that it was only supposed to operate for the first 12 months of the lease. He says that rent and outgoings have been paid for that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 2136
Decision Date: 5 September 2014

CaseChat Overview and Summary

The case of All Metals Trading Company Limited v Wright was heard in the High Court of New Zealand, Auckland Registry. The plaintiff, All Metals Trading Company Limited, sought summary judgment against the defendant, Hadley John Wright, in respect of a guarantee he provided for rent and outgoings payable under a lease agreement for premises owned by the plaintiff at Alfred Street, Onehunga. The lease was assigned to Wire by Design Ltd, a company associated with Mr Wright. The plaintiff claimed that Mr Wright was liable for a total of $405,577.01 in unpaid rent and outgoings. The central issue in the case was the interpretation of a clause in the guarantee agreement which stated that Mr Wright's liability was limited to 12 months' rent and outgoings. Mr Wright argued that this clause imposed a temporal limitation on his liability, rather than a monetary cap, and that his liability was limited to the first 12 months of the lease term.

The court considered the principles of contractual interpretation and the background circumstances known to the parties at the time of entering into the agreement. The court found that the interpretation of the guarantee clause was not suitable for summary judgment as there was insufficient evidence to determine whether the clause operated as a temporal limitation or a monetary cap on Mr Wright's liability. The court also found that Mr Wright had an arguable defence of estoppel, as there was evidence that the parties had discussed the nature and extent of Mr Wright's guarantee, and that there was an understanding that his liability would be limited to the first 12 months of the lease.

The court granted summary judgment in favour of the plaintiff for the amount of $17,687.14, which represented the maximum amount owing on Mr Wright's interpretation of the guarantee clause. The plaintiff's claim for the remaining amount was to proceed to trial. The costs of the application were reserved.

Orders