Audrey Investments Limited v McKillen
[2015] NZHC 2225
•15 September 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2542 [2015] NZHC 2225
UNDER Part 12 of the High Court Rules IN THE MATTER
of an application for summary judgment
BETWEEN
AUDREY INVESTMENTS LIMITED Plaintiff
AND
SHANE FULTON MCKILLEN First Defendant
SHANE FULTON McKILLEN and MARTIN QUINTON FINE as Trustees of the McKillen Family Trust #3
Hearing: 6 August 2015 Counsel:
MV Robinson and EC Gellert for plaintiff
BD Gustafson and RM Cederwall for defendantsJudgment:
15 September 2015
JUDGMENT OF FAIRE J
This judgment was delivered by me on 15 September 2015 at 4:45 pm], pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Simpson Grierson, Auckland
Lowndes Jordan, Auckland
Audrey Investments Limited v McKillen [2015] NZHC 2225 [15 September 2015]
Contents
Introduction ............................................................................................................[1] Background ............................................................................................................[5] The Implementation Deed....................................................................................[21] The courts approach to a summary judgment application .........................................
A plaintiff ’s summary judgment application [23]
A defendant’s summary judgment application [31] The issue...............................................................................................................[35] Submissions for the plaintiff ................................................................................[37] Submissions for the defendants............................................................................[42]
Relevant legal principles of contract variation...........................................................
Variation of contract [46] Joinder of documents [47] Authenticated signature fiction [52] Subsequent conduct [57]
Discussion ............................................................................................................[59] Result....................................................................................................................[66]
Introduction
[1] The plaintiff seeks summary judgment against the first and second defendants for $2,275,309.76, plus interest on $2,195,200 at 18 per cent from 13 September
2014 until the date of judgment, plus summary judgment on the defendants’
counterclaim, plus costs on a solicitor/client basis.
[2] The plaintiff’s claim is made under a guarantee. Ex-VCL Ltd (in receivership and in liquidation) referred to in this judgment as “VNC” had issued redeemable preference shares (referred to in this judgment as “RPS”) to the plaintiff that were due to be redeemed on 30 June 2014. The defendants guaranteed VNC’s repayment
obligations to the plaintiff. The plaintiff has made demand and has not been paid. On the face of the guarantee, the amount claimed is owing.
[3] The defendants raised three defences to the plaintiff’s claim. All three arise out of an allegation that at a board meeting on 8 May 2014, Mr Couillault, who was then a director of both the plaintiff and VNC, agreed on behalf of the plaintiff orally with VNC to extend the RPS redemption date to 31 December 2014. As a result, the defendants say:
(a) That the plaintiff and VNC contractually agreed to extend the redemption to 31 December 2014 and that what followed was a breach of that agreement by the plaintiff, which the defendants as guarantors are entitled to rely upon to resist the plaintiff’s claim;
(b)That the plaintiff’s statement that it had agreed to extend the redemption date amounted to misleading and deceptive conduct in breach of the Fair Trading Act 1986; and
(c) That the plaintiff was estopped from enforcing the guarantee because VNC and the defendants, the guarantors, relied on the plaintiff’s statement and suffered detriment as a result.
[4] The defendants have combined their statement of defence and counterclaim. In the counterclaim they reframe the three defences as alternative causes of action. In the counterclaim the defendants seek orders that they be found not liable to pay under the guarantees; that the first defendant be awarded $9,155,201 in compensation, or such other amount as the Court thinks just; and that any compensation awarded to the second defendants is to be particularised before trial.
Background
[5] VNC was established in 2007 and manufactured ready-to-serve cocktails. There were four directors on the Board:
(a) Mr Cook, the Chairman, also a director of Collins Asset Management
Ltd (CAM);
(b)Mr McKillen, the first defendant and one of the second defendants, was also a director of Collinsville Ltd, now struck off;
(c) Mr Darrow, and
(d) Mr Couillault, the sole director of the plaintiff.
[6] In May 2014 VNC had a debt of approximately $17.62 million. Of that, approximately $11.5 million was owed in RPS issued by VNC to a number of its creditors, including Audrey. The RPS issued to Audrey were intended to repay a $1.5 million advance made by Audrey to VNC. The advance was made on 26 August
2011 and was guaranteed separately by the first and second defendants.
[7] On 22 April 2013 VNC and its creditors, including the plaintiff, entered into an Implementation Deed. Under the Deed, the original advance of $1.5 million plus capitalised interest, was converted to $1.96 million RPS issued by VNC to Audrey. The new date for redeeming RPS was 30 June 2014. The defendants’ guarantees given in August 2011 were varied by the Deed.
[8] It appears that by early 2014 VNC was in a poor financial state due to projected sales in the United States not eventuating. On 27 March 2014 the Board of VNC held a meeting to discuss VNC’s financial difficulties. The Board discussed rolling the RPS redemption date past 30 June 2014. The minutes show that Mr Cook indicated that CAM would stop funding if an extension of the RPS agreement was not received from RPS holders, and that Mr Couillault indicated that Audrey would agree to extend in principle, subject to getting advice. At the end of the discussion, the Board adopted a resolution:
…“to make every effort to gain agreement of the RPS holders to roll over
funding for a minimum of six months. Confirmation required by 14 April
2014.
[9] The key meeting in this case was held on 8 May 2014. The minutes record the following:
RPS Rollover
After some discussion WC [Mr Couillault] agreed to roll and confirmed that Dave Ferrier would too. He said things have been delayed by his partner being away on a ski trip and WC only just met this week.
Collins Loan Agreement
TC [Mr Cook] noted that no funding for anything further without the agreement signed. WC to come back to the board on Monday after meeting his legal advisor. TC left everyone very clear that company will not be funded until document agreed and signed. TC asked CK what that means and he stated that we are OK, just, till next Tuesday 13 May.
[10] The next day the CFO, Mr King, emailed the minutes of the 8 May meeting to the Board requesting them to “send [him] back any changes or edits”. Mr Couillault emailed back on 12 May with his mark-ups to the minutes. Mr Couillault did not make or suggest any changes to Audrey’s agreement to the RPS rollover.
[11] On 12 May 2014 Mr Couillault met with his legal advisors to discuss the terms of an unsecured loan CAM was going to provide to VNC. After the meeting Mr Couillault emailed Mr McKillen requesting from him a statement of position, as a guarantor of Audrey’s loans to VNC:
Among other security, Audrey Investments has a guarantee from you for the current sum of $2.2m. Audrey Investments is currently considering the repayment terms of its RPS and as such urgently needs an updated personal Statement of Position from you.
[12] On the same day Mr Couillault exchanged some emails with Mr Cook, in which he raised the concerns he had about the CAM draft agreement. Mr Cook’s response did not address Mr Couillault’s concerns and stressed that time was running out for discussions.
[13] Due to a low cash flow, on 13 May 2014 VNC missed the deadline to meet payroll. On 14 May Mr Couillault emailed the Board the following:
I am still awaiting a response from Tim on some queries Simpson Grierson has raised regarding the Collins loan proposal and cannot decide on the requested changes to Audrey’s creditor position until this is received.
…
Subject to the response to my earlier queries, Audrey will agree to extend the maturity of its RPSs from 30 June 2014 to the earlier of 31 December 2014 or the date CAM withdraws its funding on the basis agreed in that asset sale proceeds are applied in order to:
[Here Mr Couillault listed the order in which certain repayments to creditors had to be made.]
[14] Later the same day Mr Couillault resigned as a director of VNC with immediate effect.
[15] The minutes of the Board’s next meeting, held on 5 June 2014, record:
WC has not signed although it was noted that at board meeting on 8 May (and noted in the minutes) he did confirm he would roll as would Dave Ferrier – TC questioned what can he do at end of June if doesn’t confirm the extension in writing? Could exercise rights and put the RPS into default which could trigger the bank and affect the sale process.
…
MD [Mr Darrow] – to go back to WC and ask “do you have signed Audrey and DF RPS rollover agreement”
[16] Following the meeting, VNC released a business update, in which it stated that RPS holders have agreed to extend the term of repayment to 31 December 2014 to allow the sale process to be completed. Mr Couillault emailed the directors of VNC on 16 June 2014 disputing that Audrey had agreed to extend the redemption date beyond 30 June 2014. In an exchange of emails that followed, Mr Darrow asserted that Audrey agreed to the extension in the Board meeting of 8 May 2014. Mr Couillault asserted that Audrey’s agreement to the extension had to be recorded in writing.
[17] Mr Darrow and Mr Couillault met on 17 June 2014. Mr Couillault deposed in his evidence that at the meeting he explained that Audrey agreed to extend the redemption date after issues with CAM’s funding of VNC were resolved.
[18] On 20 June 2014 Mr Couillault emailed Mr Darrow stating that Audrey “will consider” the extension until such date at which funding stops or VNC can no longer trade. In reply, Mr Darrow stated that without Mr Ferrier’s agreement to the extension, all other issues were irrelevant and VNC would move into receivership. This correspondence was followed up on 23 June when Mr Darrow asked Mr Couillault to “confirm that Audrey will agree to extend the RPS through a sale process”.
[19] On 30 June 2014 VNC was placed into administration. The Shareholder
Business Update, circulated at about the same time, stated:
Although earlier indicating in a board meeting they would extend and fund a share of the Cameron & Co costs, the obvious legal approach to maximise the value to the shareholders in a sale of the assets, they have decided not to, which is their legal right. The majority shareholders have funded the Cameron & Co costs to date and all other RPS holders had agreed in writing an extension to the term of the RPS agreement.
[20] VNC was eventually sold by receivers in November 2014. The assets were sold for $14,818.40.
The Implementation Deed
[21] The provisions of the Deed most relevant to the present dispute are those that deal with how the Deed ought to be varied. Clause 11.2 of the Deed deals with variations and waiver of the Deed:
Variation and waiver: This Deed may only be varied in writing signed by the parties. No waiver of any breach, or failure to enforce any provision, of this Deed at any time by any party will in any way affect, limit or waive that party’s right thereafter to enforce and compel strict compliance with the provisions of this Deed.
[22] The first schedule to the Deed concerns the terms of issue of RPS.
“Redemption date” is there defined as follows:
“Redemption date” means, in relation to each RPS, 30 June 2014 (or such later date as the Company and a holder of RPS may agree in writing).
The courts approach to a summary judgment application
A plaintiff ’s summary judgment application
[23] Part 12 of the High Court Rules deals with applications for summary judgment. Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the Court that a defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. The obligations imposed by the rule have been examined by a number of authorities.
[24] The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukziener v Hanover Finance Ltd where the Court said:1
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11
PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept
uncritically evidence that is inherently lacking in credibility, as for example
where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[25] In Pemberton v Chappell the Court also commented on the position where a defence is not evident on a plaintiff’s pleading and said:2
If a defence is not evident on the plaintiff’s pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307187 at [26].
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
[26] That position was further reinforced in Australian Guarantee Corporation
(New Zealand) Ltd v McBeth where the Court said:3
Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff’s verification stands unchallenged and ought to be accepted unless it is patently wrong.
[27] Hypothetical possibilities in vague terms, unsupported by any positive assertion or corroborative documentation will not frustrate the obligation on a plaintiff to discharge the onus of proof.4
[28] In Middleditch v New Zealand Hotel Investments Ltd, the Court raised a caution and said:5
The courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories. That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.
[29] A court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.6 However, the Court will not reject even dubious affidavit evidence, even if there is suspicion as to the good faith of the deponent, if there is an essential core of complaint that supports a defence. In essence, the inquiry is whether or not the person’s assertion passes the threshold of credibility: Pemberton v Chappell;7 Orrell v Midas Interior Design Group Ltd.8
[30] In Tilialo v Contractors Bonding Ltd it was observed:9
Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment. Views may well differ.
3 Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 59.
4 SH Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
5 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 395.
6 Eng Mee Yong v Letchumanan [1980] AC 331 (PC).
7 Pemberton v Chappell, above n 2.
8 Orrell v Midas Interior Design Group Ltd (1991) 4 PRNZ 608 (CA) at 613.
9 Tilialo v Contractors Bonding Ltd CA50/93, 15 April 1994 at 6.
A defendant’s summary judgment application
[31] Where a defendant applies for summary judgment, which is what the plaintiff
is doing in respect of the defendants’ counterclaim, the position is covered by rule
12.2(2) of the High Court Rules. It requires that the defendant satisfy the court that
none of the causes of action in the plaintiff’s statement of claim can succeed.
[32] Westpac Banking Corp v MM Kembla (New Zealand) Ltd noted the following when dealing with r 136(2), the predecessor of r 12.2(2):10
[58] The applications for summary judgment were made under R 136(2) of the High Court Rules which permits the Court to give judgment against the plaintiff “if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed”.
[59] Since R 136(2) permits summary judgment only where a defendant satisfies the Court that the plaintiff cannot succeed on any of its causes of action, the procedure is not directly equivalent to the plaintiff's summary judgment provided by R 136(1). …
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff's claim. Examples, cited in McGechan on Procedure at HR 136.09A, are where the wrong party has proceeded or where the claim is clearly met by qualified privilege.
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination
turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[33] These passages were approved by the Privy Council in Jones v Attorney- General.11
[34] Summary judgment applications are appropriate where there is a complete and incontrovertible answer on the facts. By contrast, a strike out application is appropriate when there is a clear legal impediment to liability.
The issue
[35] The central issue in this case is whether or not at the meeting of 8 May 2014
Mr Couillault agreed on behalf of Audrey to extend the redemption date until
31 December 2014. The defendants allege, and the plaintiffs deny, that this occurred, and that Mr Couillault’s statements constituted a valid variation of the Implementation Deed.
[36] The pleadings, defences, and counterclaim centre on the resolution of this issue. I will first examine Audrey’s submissions on its application as plaintiff for summary judgment.
Submissions for the plaintiff
[37] Audrey denies agreeing to an extension on 8 May 2014 or at any point thereafter, but submits that even if it did, what occurred at that meeting was of no legal consequence for two reasons:
(a) Under the Deed, any agreement would need to have been in writing;
(b) The parties always acted on the basis that the redemption date was not
extended and they continued to seek Audrey’s consent after the 8 May
2014 meeting.
[38] Audrey’s primary argument that is relevant to both of the above points is that Audrey never agreed to the extension unconditionally, and that its initial indications of agreement were always subject to CAM funding being finalised. In support, Audrey relies on the minutes of the meetings held on 27 March and 8 May 2014, and the issues with CAM funding pointed out by Mr Couillault on 12 May.
[39] Audrey then submits that all parties were aware throughout that the agreement had to be in writing, and it is for this reason that communications post
8 May 2014 are based on the premise that Audrey has not given its agreement. In particular, Audrey refers to the following evidence:
(a) emails exchanged between Mr Couillault and Mr Cook on 12 May, in which Mr Cook objected to Mr Couillault’s delay in obtaining legal advice on the CAM funding agreement;
(b)the minutes of the 5 June 2014 meeting in which the Board contemplated the possibility of default if Audrey did not agree to the extension;
(c) the emails exchanged between Mr Couillault and Mr Darrow on
20 June 2014, in which Mr Darrow sought to persuade Audrey to agree;
(d) the update to shareholders on 30 June 2014, in which VNC
acknowledged Audrey’s right not to agree to the extension.
[40] Additionally, Audrey submits that the alleged representation made by Mr Couillault was made to VNC, the issuer of the RPS, and not to VNC’s guarantors. It submits that VNC’s liquidators have accepted Audrey’s proof of debt. Audrey submits that the guarantors cannot assert a position contrary to that accepted by VNC.
[41] Lastly, Audrey submits that irrespective of what was or was not agreed on
8 May 2014 is of no legal consequence, as it had a legal right not to agree to an extension.
Submissions for the defendants
[42] The defendants submit that contrary to Audrey’s submissions, the agreement on 8 May 2014 was recorded in writing. Specifically, it was recorded in the minutes of the meeting, the accuracy of which was confirmed by Mr Couillault by his email of 12 May. The defendants submit that the events of the May meeting have to be seen in the context of the Board’s resolution of 27 March 2014, in which VNC’s directors, including Mr Couillault, undertook to make every effort to gain the agreement of RPS holders to extend the redemption date.
[43] The defendants then submit that the joinder of documents rule applies, and that the minutes from the 8 May 2014 meeting, the resolution from 27 March 2014 and the letter recording the rollover, signed by all RPS holders with the exception of Audrey, together provide sufficient documentary evidence to prove that the redemption date was rolled over to 31 December 2014.
[44] In respect of Audrey’s claim that any agreement was conditional on CAM
providing funding, the defendants say that this condition is not recorded in the
documents. If this factual dispute is to be determined, it goes to matters of credibility, which are appropriately determined at trial. The defendants state at this point that their argument is supported by affidavits of the other Board members and the CFO of VNC.
[45] The defendants submit that summary judgment would be premature, as documents relevant to establishing the facts can still be discovered. In particular, the defendants wish to discover any communications between Mr Couillault and his partner, Mr Ferrier, between February and July 2014.
Relevant legal principles of contract variation
Variation of contract
[46] The requirements for variation of a contract derive from the law governing contract formation. The variation must be a valid and subsisting contract, there must be a consensus on the terms of the variation, and it must be supported by consideration.12 The same contractual principles of offer and acceptance, intention and certainty apply to variations of contract.
Joinder of documents
[47] Considering for the moment that the parties did agree to vary the Deed, and that that variation met all of the necessary requirements, the next question to ask is whether the variation in this case complies with the requirement in cl 11.2 of the Deed that any variation can only be in writing, signed by the parties. The defendants’ allegation that the variation is recorded in the written minutes of the May meeting requires an examination of the authenticated signature fiction and principles of joinder of documents.
[48] The joinder of documents has its roots in the Statute of Frauds, and more recently, the now repealed Contracts Enforcement Act 1956. Section 2(2) of that Act required every guarantee and every contract relating to a land transaction to be in
writing. That section has now in effect been replaced by s 24 of the Property Law
12 Sean Wilken QC and Karim Ghaly The Law of Waiver, Variation, and Estoppel (3rd ed, Oxford
University Press, Oxford, 2012) at [2.04-2.06].
Act 2007. The principles of joinder of documents were developed to allow an aggrieved party to enforce a contract where its terms were not contained within one document, and where a joinder of documents allowed them to be read together as a written record. The doctrine was summarised thus by Tipping J in TA Dellaca Ltd v PDL Industries Ltd:13
It is possible by dint of the linking up doctrine to read more than one document together when there is sufficient reference in the document which constitutes the signed memorandum or note to the other document or documents.
[49] A document relied on as a memorandum or note need not have been prepared as such, provided that:
(a) it was created after the alleged contract was formed; (b) it evinces the creation of the contract;
(c) it sets out the agreement with adequate precision.14
[50] A plaintiff who wishes to rely on joinder of documents to establish the existence of a contract has to establish:15
(a) the existence of a document signed by the defendant;
(b)a sufficient reference, express or implied, in that document to a second document;
(c) a sufficiently complete memorandum formed by the two when read together.
[51] Parol evidence may be used to link the documents together, but for a joinder to be possible there must be a clear indication of a connection.16
13 TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 98.
14 Laws of New Zealand Contract (online ed) at [165].
15 Burrows, Finn and Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington,
2012) at [9.3.4(d)].
16 Saunderson v Purchase [1958] NZLR 588 (SC).
Authenticated signature fiction
[52] If the defendants wish to rely on the joinder of documents, they will have to demonstrate that there exists a document which was signed by the defendants. The particular document which the defendants say contains Audrey’s agreement to the variation is the minutes of the 8 May 2014 meeting. The minutes were taken by a person authorised by VNC and sent to all members of the Board for approval. Mr Couillault by his email of 12 May 2014 appears to have confirmed the relevant minute. The question is whether this constitutes a “signature” of the relevant document. To this end, principles surrounding the authenticated signature fiction are relevant.
[53] Authenticated signature fiction was developed by the courts to ease the strictness of statutory requirements.17 In certain cases, the device is used to treat a printed version of the party’s name at any point in the document as being a “signature”.18 The application of the doctrine was summarised by Tipping J in TA Dellaca Ltd:19
The doctrine of the authenticated signature fiction applies if, but only if, the following three conditions are established:
(1) the contract or some memorandum or note thereof containing the material terms must have been prepared by or on behalf of the party sought to be charged and must have that party's name written or printed on it;
(2) the relevant document must be handed or sent by the party sought to be charged or his authorised agent to the other party for the other party to sign;
(3) it must be shown either from the form of the document or from the surrounding circumstances that the document is not intended to be signed by anyone other than the party to whom it is sent and that when signed by him it is intended to constitute a complete and binding contract between the parties.
17 Burrows, Finn and Todd, above n 15, at [9.3.4(c)].
18 At [9.3.4(c)].
19 TA Dellaca Ltd v PDL Industries Ltd, above n 13, at 98.
[54] Importantly, for the fiction to apply, the “signature” must be intended to authenticate the whole of the document.20 Additionally, the fiction only applies to documents that were always intended to have a contractual effect.21
[55] Justice Tipping relied on the earlier decisions of Sturt v McInnes22 and Van der Veeken v Watsons Farm (Pukepoto) Ltd.23 In both of those decisions the Court declined to follow the less stringent approach adopted in Bilsland v Terry.24 In that case the parties commenced negotiations for the sale and purchase of the plaintiff’s farm. Agreement was reached on all matters, save for three points that concerned the interest on the second mortgage, the right of capital repayment and water rights. The
plaintiff signed the agreement but instructed his solicitor not to hand it over until clauses relating to the interest had been altered as he required. The parties eventually agreed on the term via their solicitors. The plaintiff’s solicitor handed over the agreement to the defendant’s solicitor together with a deposit. The defendant’s solicitor was unaware at the time that his clients no longer desired to carry through with the purchase. The plaintiff sued for specific performance on the agreement he initially signed prior to the alterations to the interest term. The Court stated that the question for the application of the authenticated signature fiction was whether there was evidence that the initial written agreement was to be regarded by the parties as complete in itself. The Court found that by the time the plaintiff signed the initial agreement the parties had an oral agreement with all terms agreed upon. The subsequent agreement on the interest term was in conformity with the earlier oral agreement.
[56] An additional requirement to the three outlined in TA Dellaca was found in the more recent case of Tait-Jamieson v Cardrona Ski Resort Ltd.25 The Court held that it is fundamental to the authenticated signature fiction that there was an oral agreement between the parties on the essential terms of their deal before delivery of the document took place. This approach appears to reconcile Bilsland v Terry with
TA Dellaca. In Cardrona Ski Resort the plaintiff and two others agreed orally to
20 Caton v Caton (1867) LR 2 HL 127.
21 TA Dellaca Ltd v PDL Industries Ltd, above n 13, at 99.
22 Sturt v McInnes [1974] 1 NZLR 729 (SC).
23 Van der Veeken v Watsons Farm (Pukepoto) Ltd [1974] 2 NZLR 146 (SC).
24 Bilsland v Terry [1972] NZLR 43 (SC).
25 Tait-Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105 (HC).
become guarantors of a trust’s liability to pay for services provided by the defendant as payments fell due, and in their oral agreement, specified the maximum amounts for which each of them will be liable. One of the guarantors prepared a document recording the guarantee. The names of all guarantors were printed on the document, but it was signed only by one guarantor. The Court found that the authenticated signature fiction did not apply because there was no prior oral agreement between the plaintiff and the defendant.
Subsequent conduct
[57] The last point that is relevant to determining whether the parties agreed to the variation as alleged by the defendants is the subsequent conduct of the parties.
[58] In Wholesale Distributors Ltd v Gibbons Holdings Ltd the Supreme Court established that evidence of subsequent conduct is admissible to construe the original meaning of the contract.26 Justice Tipping stated that the focus of the inquiry must be on the objective conduct rather than expressions of subjective intention or understanding.27 Their Honours disagreed on whether subsequent conduct must be of all the parties to the contract. Justice Thomas considered the conduct of one party could be relevant, whereas Tipping and Anderson JJ considered that only the conduct of all the parties should be considered.28
Discussion
[59] The focus of the present dispute is whether Audrey agreed to extend the variation from the June date to the December date, and whether this agreement was conditional on CAM providing funding to VNC.
[60] The minutes of the May meeting record that Audrey agreed to the variation orally and that this agreement was unconditional. Mr Couillault then had an opportunity on 12 May 2014 to check the accuracy of the minutes. He made some changes to the minutes, but none to the part recording Audrey’s agreement to the
variation. The obvious implication is that Mr Couillault accepted as true and accurate
26 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277.
27 At [60], per Tipping J.
28 At [53] per Tipping J and at [73] per Anderson J.
that Audrey will unconditionally agree to the variation. This implication is supported by the affidavits of the other members of the Board.
[61] By contrast there is some validity in Audrey’s argument that the parties’ subsequent conduct indicates a lack of certainty in the variation. This is apparent from Mr Couillault’s email to Mr McKillen on 12 May 2014 and his email to the Board of 14 May. In both emails Mr Couillault expressed that Audrey was still considering agreeing to the extension. The response by the directors of the Board to these emails did not raise any objections about Audrey’s position, despite the defendants’ allegation that by that time Audrey had already agreed to the extension. In fact, it is not until Mr Couillault’s response to the minutes of the 5 June 2014 meeting that the Board members raised the objection that Audrey had already agreed to extend the redemption date.
[62] It is arguable that Audrey’s agreement to the extension at the May meeting was conditional on CAM providing funding. But I also see merit in the defendants’ submission that Mr Couillault’s communications with Mr Ferrier need to be discovered. It is possible that a cross-examination of the other Board members may shed more light on Audrey’s purported agreement that they claim was unconditional in their affidavits. There would seem to be a need to resolve material conflicts of evidence and assessments of credibility, neither of which are appropriate in the context of a summary judgment. In the end, a determination must be made on all relevant evidence, which is not available to this Court.
[63] Next, I consider Audrey’s claim that no variation existed because it was never recorded in writing. I cannot determine that issue on this application. There is a possibility that the defendants may succeed in using the joinder of documents and authenticated signature fiction to establish that the minutes of the May meeting and their acceptance by Mr Couillault constitute a variation in writing for the purposes of the Deed. It is not appropriate to resolve these questions at this stage as these points received only brief attention in the submissions.
[64] I do not consider that VNC’s subsequent attempts to get Audrey to confirm its
purported agreement in writing necessarily mean that the agreement never occurred.
It could well be that Board members were simply responding to a signalled breach and thereby trying to minimise the damage. That is a matter that can only be properly addressed at trial.
[65] I conclude that summary judgment under either application is not appropriate at this stage. The matter must proceed to trial after the parties have had the benefit of interlocutory procedures, particularly discovery.
Result
[66] The plaintiff’s application for summary judgment on its claim against the defendants is dismissed.
[67] The plaintiff’s application for summary judgment on the defendants’
counterclaim is dismissed.
[68] Costs are reserved in line with the approach approved by the Court of Appeal in NZI Bank Ltd v Philpott.29
[69] In accordance with r 12.12 I give the following directions as to the future conduct of this proceeding:
(a) All pleadings including amendments to the existing pleadings shall be filed and served within 15 working days of this judgment.
(b)Any party who has not given full initial disclosure in accordance with r 8.4 shall do so within 15 working days of this judgment.
(c) Counsel shall within 25 working days of this judgment discuss and endeavour to agree on an appropriate discovery order and the manner in which inspection will subsequently take place, having addressed the matters in the discovery checklist in accordance with Part 1 of sch 9 of the High Court Rules. They must then take the steps which
are required by rr 8.11(2) and (3).
29 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA), (1990) 3 PRNZ 695.
(d)The Registrar shall allocate a case management conference on the first available date after the expiry of 40 working days of this judgment.
The provisions of r 7.3 shall apply in respect of that conference.
JA Faire J
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