Beggs v North Face Construction 2022 Limited
[2025] NZHC 552
•18 March 2025
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2023-454-90
[2025] NZHC 552
BETWEEN CHRISTOPHER DAVID BEGGS and LEONIE FRANCES BEGGS
PlaintiffsAND
NORTH FACE CONSTRUCTION 2022 LIMITED
First Defendant
ANITA MAREE LANCASTER
Second Defendant
Hearing: 10 February 2025 Appearances:
S Barker for Plaintiffs
S Connolly for Defendants
Judgment:
18 March 2025
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] The second defendant in this proceeding applies for summary judgment against the plaintiffs and/or strike out of the plaintiffs’ claims against her.
[2] On 20 May 2024, I dismissed the plaintiffs’ application for summary judgment against the second defendant as covenantor (the Judgment).1 In the Judgment, I set out the background between the plaintiffs and the defendants as follows:2
[6] On 21 March 2022, North Face Construction Ltd (NFC) entered into an agreement to sell its business to North Face Construction 2022 Ltd (NFC22) (ASP). The second defendant, Anita Lancaster, is the sole director
1 Beggs v North Face Construction 2022 Limited [2024] NZHC 1254. Summary judgment was granted against the first defendant unopposed.
2 At [6]-[13].
BEGGS v NORTH FACE CONSTRUCTION 2022 LIMITED [2025] NZHC 552 [18 March 2025]
and shareholder of NFC22. The plaintiffs are shareholders of NFC. Christopher Beggs is also a director of NFC.
[7]The ASP provided that:
(a)Part of the purchase price would be left in by way of vendor finance and subject to certain financial performance targets;
(b)To secure the loan, NFC22 would grant in favour of NFC a first ranking general security agreement.
(c)NFC as lender and NFC22 as borrower entered into a term loan agreement for the vendor finance (Loan Agreement). The second defendant signed the Loan Agreement as guarantor.
[8] It was a condition precedent of the loan advance that “[i]f any person is named in this agreement as a guarantor, the guarantor must have signed a deed of guarantee and indemnity …”. No separate deed of guarantee was signed by the second defendant.
[9] On 31 March 2022 a form of Auckland District Law Society (ADLS) general security agreement (GSA) was entered into by NFC and NFC22, incorporating the ADLS memorandum of general terms and conditions number 2018/4344 (General Terms) and the Loan Agreement by reference. The second defendant signed the GSA as covenantor. The loan advance was subsequently made.
[10] On 21 December 2022, NFC assigned its right, title and interest in the GSA and Loan Agreement to the plaintiffs. The second defendant signed as director of NFC22 and by herself personally.
[11] On 8 August 2023, NFC22 ceased to carry on business, a default under the GSA. On 16 August 2023, the plaintiffs sent a formal demand to the defendants for payment of the amount outstanding and payable under the Loan Agreement as at 16 August 2023, being the sum of $646,666 and for interest and solicitor-client costs.
[12] Since making the demand, the plaintiffs have exercised power of sale pursuant to the GSA against certain items of NFC22’s property, which has yielded a gross sum of $104,261.67. After accounting for legal costs and realisation costs, the net sum owed to the plaintiffs as at the date of the claim is $574,942.22.
[13] The plaintiffs contend that the second defendant is personally liable as covenantor under the GSA. The plaintiffs acknowledge that the second defendant did not provide a written deed of guarantee and do not seek summary judgment against her as guarantor. However, the plaintiffs reserve their position regarding liability as guarantor if their application for summary judgment is unsuccessful.
[3] Following the Judgment, the plaintiffs filed an amended statement of claim. The amended statement of claim sets out two causes of action against the second defendant:
(a)With regard to the first cause of action, the plaintiffs now contend that the second defendant is personally liable as guarantor. They advance this argument on the basis that the Loan Agreement constituted a written contract of guarantee for the purposes of s 27(2) of the Property Law Act 2007 (PLA) (that is, it is in writing and signed by the guarantor).3
(b)The second cause of action is new. The plaintiffs contend that there should be an order for specific performance requiring the second defendant to execute a deed of guarantee based on the Auckland District Law Society (ADLS) form, second edition 2016(3). They also seek an order requiring the second defendant (as guarantor) to disclose the whereabouts of remaining NFC22 assets which are the subject of the security interest conferred pursuant to the GSA.
[4] On 26 August 2024, the second defendant applied for summary judgment against the plaintiffs or, in the alternative, an order striking out the first and/or second cause of action. In respect of the first cause of action, the second defendant contends that there is no written contract of guarantee as required by s 27(2) of the PLA. Additionally, the second defendant submits that the present case cannot be distinguished from the decision of the Supreme Court in Brougham v Regan.4 The second defendant contends that the second cause of action for specific performance cannot succeed because the Loan Agreement referred to the provision of the guarantee as a condition precedent to the advance of the loan. This was then, in the second defendant’s submission, waived by the lender, meaning there is no ongoing obligation. The second defendant also contends that the order sought as to the whereabouts of
3 Mr Barker, for the plaintiffs, acknowledged that the Judgment determined the issue of whether the second defendant is personally liable as covenantor under the GSA.
4 Brougham v Regan [2020] NZSC 118, [2020] 1 NZLR 315 [Brougham].
remaining NFC22 assets is irrelevant to the present proceeding regarding the liability of the second defendant and should be struck out as an abuse of process.
[5] In respect of both causes of action, the issue is whether the cause of action is so untenable that it cannot succeed.
Legal principles
Summary judgment
[6]Rule 12.2 of the High Court Rules relevantly provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
…
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[7] The approach to an application for summary judgment by defendants was discussed in the Court of Appeal’s decision in Westpac Banking Corp v MM Kembla New Zealand Ltd, which was later summarised by the Court of Appeal in Stephens v Barron:5
[9] … Summary judgment may be given under that rule if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed. This Court's decision in Westpac Banking Corp v M M Kembla New Zealand Ltd makes it clear that a defendant seeking summary judgment has a considerable burden to discharge. Elias CJ delivering the judgment of the Court, made the following points:
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff's claim.
(b)An 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
5 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [9] citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [61]–[62], [64], [66] and [68] (footnotes omitted).
determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)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 is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
[8]As the Privy Council noted in Jones v Attorney-General, summary judgment:6
… should not be given for the defendant unless [the defendant] shows on the balance of probabilities that none of the plaintiff’s claims can succeed. That is an exacting test, and rightly so since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless.
Strike out
[9] With regard to the defendant’s application for strike out, r 15.1 of the High Court Rules 2016 relevantly provides:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
…
[10] The principles pertaining to this provision are well-established. The principles were summarised by the Court of Appeal in Attorney-General v Prince, which has been most recently endorsed by the Supreme Court in Smith v Fonterra Co-operative Group Ltd:7
6 Jones v Attorney-General [2003] UKPC 48, [2004] 1 NZLR 433 at [10].
7 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at [38] as cited in Smith v Fonterra Co-Operative Group Ltd [2024] NZSC 5, [2024] 1 NZLR 134 [Smith v Fonterra] at [74]–[75]. See also Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] per Elias CJ and Anderson J.
[38] We [address each cause of action] through the lens of well-established strike out principles. That is to say, we assume the pleaded material facts are true save for those that are entirely speculative and without foundation and we also bear in mind that the strike out jurisdiction is to be exercised sparingly and only in clear cases. We must be certain the claim is so untenable it cannot succeed and slow to strike out claims in any developing area of law. The fact a claim involves a complex question of law which requires extensive argument should be no bar provided we have the requisite materials and assistance to determine the matter. We must also be mindful of the well-established principle that if any deficiencies can be cured by an amendment to the pleadings, allowing the claim to proceed on condition the necessary amendments are made, is preferable to strike out.
[11] As the Supreme Court in Smith v Fonterra emphasised, a measured approach is appropriate. The Court held that:8
[84] Such an approach is consistent with fully informed access to civil justice by those who have a tenable case that they have been harmed and who will otherwise go without remedy based on a pre-emptive evaluation only. And as was observed in Couch, a refusal to strike out a cause of action “says little about its eventual merit”. That is to say, it is not a commentary on whether or not the claim will ultimately succeed.
[85] Pre-emptive elimination is only appropriate where it can be said that whatever the facts proved, or arguments and policy considerations advanced at trial, a case is bound to fail.
[12] The courts have observed the similarity between a defendant’s application for summary judgment and an application for strike out.9 The applications, however, are not interchangeable. In a summary judgment application, affidavit evidence can be provided and, therefore, judgment can be obtained on the basis of material outside of the pleadings. Further, as Elias CJ noted in Body Corporate No 207624 v North Shore City Council, if the dispute is essentially a legal question, striking out is likely to be the appropriate course of action.10
8 Smith v Fonterra, above n 7, at [84]–[85] citing Couch v Attorney-General, above n 7, at [37] per Elias CJ and Anderson J (footnotes omitted).
9 See Ferrymead Tavern Ltd v The Christchurch Press Co Ltd [1999] NZAR 529 (HC) at [10]–[12]; Body Corporate No 2076624 v Northshore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [4]; and Bernard v Space 2000 Ltd (2001) 15 PRNZ 338 (CA) at [19]–[21].
10 Body Corporate No 207624 v North Shore City Council, above n 9, at [4] as cited in Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR12.2.07] [McGechan on Procedure].
First cause of action: personal liability as guarantor under Loan Agreement
[13] The plaintiffs previously acknowledged in written submissions dated 17 April 2024 that the second defendant did not provide a written deed of guarantee and that they did not seek liability against her on that basis.11 However, the plaintiffs reserved their position on the guarantee “if the substantive claim progresses beyond summary judgment”. The plaintiffs’ first cause of action is now premised on the contention that the second defendant provided a written contract of guarantee in that the Loan Agreement constituted a contract of guarantee. This allegation is not expressly pleaded in the amended statement of claim. Indeed, the amended statement of claim alleges that:
Despite signing the Loan Agreement (inter alia) in her capacity as guarantor, the second defendant has failed or refused to sign a deed of guarantee in favour of NFC (now the plaintiff).
[14] Nevertheless, I will consider the tenability of the plaintiffs’ argument on the assumption that the first cause of action in the statement of claim will be amended.12
[15] The plaintiffs contend the Loan Agreement, interpreted in the context of the negotiations between the parties, constituted a contract of guarantee. I summarise the plaintiffs’ arguments below:
(a)The second defendant was listed as and signed the Loan Agreement as guarantor on 31 March 2022.
(b)The second defendant was included within the definition of ‘You’ in the interpretation section of the loan conditions, meaning that she was personally bound by the agreement to repay clause. The latter provides: “You agree that you will repay all amounts that you borrow from us together with interest charges, fees, other charges”.
(c)One of the conditions precedent to the advance was “if any person is named in this agreement as a guarantor, the guarantor must have signed
11 The plaintiffs noted s 27 of the PLA and Brougham v Regan, above n 4.
12 McGechan on Procedure, above n 10, at [HR12.2.07(1)].
a deed of guarantee and indemnity in the form required by [NFC] and the conditions precedent to the acceptance of that guarantee (if any) must have been completed to [NFC's] satisfaction”.
(d)The Loan Agreement recorded that “The lender acknowledges and accepts that the personal guarantee of Anita Lancaster shall not extend to or include the family home at 324 Kimberley Road, Levin whether owned jointly with her partner or their Family Trust, or any replacement thereof”.
(e)Whilst initially NFC22’s lawyers sought to delete the reference to the second defendant as guarantor, they accepted the guarantee when the clause above was inserted into the Loan Agreement.
(f)The Assignment Agreement of 21 December 2022 also included references to the “personal guarantee” of the second defendant and referred to her as “guarantor”.
[16]The Loan Agreement contains the following conditions precedent clause:
Conditions precedent to advance
Before we can make the first advance to you under this contract:
(a)you must have signed this agreement together with all of the securities;
(b)the conditions set out in the Loan Conditions Schedule (if any) and any other pre-settlement requirements that we ask you to complete must have been completed to our satisfaction; and
(c)if any person is named in this agreement as a guarantor, the guarantor must have signed a deed of guarantee and indemnity in the form required by us and the conditions precedent to the acceptance of that guarantee (if any) must have been completed to our satisfaction.
[17]The word “you” is defined as follows:
Construction of terms: In this contract, unless inconsistent with the context:
…
(ii)the word “you” includes all persons executing this contract regardless of how they may be described in this contract and the covenants contained and implied in this contract will bind each of you jointly and severally as the principal party to this contract;
[18] In Regan v Brougham,13 Simon France J considered whether a loan agreement in materially identical form (ADLS) could stand on its own as a contract of guarantee. The Court considered the argument raised by the plaintiffs in points (a) and (b) above. The Court interpreted “you” as not applying to a person executing the document as guarantee.14 The Court of Appeal confirmed this interpretation,15 noting that, as is fundamental to a guarantee, the guarantor does not directly undertake the borrower’s obligations, but guarantees them. Liability as guarantor accrues only if, and when, the principal obligor defaults. However, in reliance on the decision of Tipping J in Bradley West Solicitors Nominee Co Ltd v Keeman,16 the Court of Appeal found that the loan agreement satisfied the requirements of s 27 of the PLA on the basis that:17
The Agreement (and thus the obligations being guaranteed) is in writing, as is the full name and details of the guarantor and words below the signature “signed by the guarantor”. And Mr Brougham has signed the Agreement as guarantor. So there is compliance with each of the two requirements set out in s 27(2).
[19]On appeal, the Supreme Court held:18
[35] It is notable that there is no reference in Bradley West to s 2 of the 1956 Act. In light of that, it was not authority for the proposition that merely signing a document as guarantor necessarily means that document is an effective guarantee in terms of s 2 of the 1956 Act. Even if it had been, that would not necessarily mean it remained good law in respect of s 27(2). Section 27(2) is a more exacting requirement for the enforceability of a guarantee than s 2(2) of the 1956 Act. On its plain wording, it requires that “a contract of guarantee” must be signed by the guarantor. “Contract of guarantee” is defined as a contract under which a person agrees to answer to another for the debt, default or liability of a third person. If the document signed by the person said to be a guarantor does not include an agreement to answer for the debt, default or liability of a third person, it is not a contract of guarantee.
[36] In the present case, the loan agreement does not include any provision under which Mr Brougham agrees to answer to the trustees for the debt,
13 Regan v Brougham [2017] NZHC 1091.
14 At [20]–[24].
15 Regan & Tuffin v Brougham [2019] NZCA 401, [2020] 2 NZLR 299 at [8].
16 Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC) [Bradley West].
17 Regan & Tuffin v Brougham, above n 15, at [24].
18 Brougham v Regan, above n 4, at [35]–[37] (footnotes omitted).
default or liability of the company. On the contrary, the loan agreement makes it clear that a separate document to that effect is required as a condition precedent to the making of the advance. In the absence of that further document, no guarantee liability arises. The decision of the Court of Appeal in this case was predicated on its finding that “[t]he Agreement (and thus the obligations being guaranteed) is in writing”. With respect to the Court of Appeal, we do not consider that means the loan agreement meets the requirements of s 27(2) in the absence of any provision in the loan agreement under which Mr Brougham agrees to guarantee the company’s obligations.
[37] Even if we accepted that Bradley West remained good law after the coming into effect of s 27(2), we would not see it as applicable to the present case. The underlying premise of Bradley West is that the document in that case set out the terms of the loan clearly and it could be inferred that the guarantor guaranteed the borrower’s obligations under the loan. In the present case, two guarantors were named in the document but only one signed. And even if that is put to one side, there is real doubt as to whether the parties agreed that Mr Brougham would guarantee all of the indebtedness of the company, or only $25,000, given that the initial arrangement was that he and Ms Dey would guarantee $25,000 each. So, even if the approach of Bradley West to the inferring of guarantee terms were open to us, we would not draw that inference. The policy behind s 27 is that requiring a signed document setting out the terms of the guarantee avoids doubts such as this arising.
[20] The plaintiffs seek to distinguish Brougham on the facts and contend that I would be “better guided by the reasoning in Bradley West”. Mr Barker submits that the Supreme Court did not overrule Bradley West, but distinguished it, and therefore it remains good law.
[21] Mr Barker submits that, in the present case, the context of the negotiations is highly relevant to whether the Loan Agreement is a contract of guarantee. He also contends that negotiations were relevant to whether, in terms of the conditions precedent to the advance, the Loan Agreement was the form required by NFC. He refers to emails between the parties’ solicitors between 29 March 2022 and 1 April 2022. In that exchange, the solicitors for the defendants initially contended that “there has never been any discussion let alone agreement on Anita providing a personal guarantee”. Additionally, they noted “Anita is adamant that she is not prepared to put the family home at risk providing a personal guarantee which, as we have stated before, has never been discussed or agreed to”. The solicitors for NFC then clarified that NFC was not asking for security over “the Trust owned property of Anita Lancaster so we are not asking her it [sic] put her family home at risk”, but “asking the shareholder of the company to personally guarantee the loan”. The
solicitors for the defendants then requested a new clause be inserted in the Loan Agreement excluding the family home from the personal guarantee. The solicitors for NFC then forwarded the Loan Agreement and GSA and other documents for signing. An additional clause was included in the Loan Agreement as follows:
Guarantee
The lender acknowledges and accepts that the personal guarantee of Anita Lancaster shall not extend to or include the family home at 324 Kimberley Road, Levin whether owned jointly with her partner or their Family Trust, or any replacement thereof.
[22] The solicitors for the defendants then sent an email in which they confirmed “the contract is now unconditional” and attached the signed copies of the Loan Agreement and the GSA.
[23] The plaintiffs also contend that the second defendant affirmed that the Loan Agreement constituted a guarantee when NFC assigned its right and title in that agreement to the plaintiffs in December 2022. Mr Barker notes that the second defendant signed the Assignment Agreement as director on behalf of NFC22, and in her personal capacity. Further, the agreement stated:
(a)In the Background section at cl 2, that vendor finance was secured by “The personal Guarantee of Anita as to the obligations of NFC22L”.
(b)In the Background section at cl 5 that “NFC22L has agreed to sign this Assignment of the Term Loan Agreement, incorporating the Guarantee, dated 31 March 2022…”
(c)In the operative section at cl 4 that “Anita, as Guarantor consents to this Deed and confirms to Chris & Leonie that the Guarantee remains in effect on the terms set out in the Term Loan Agreement dated 31 March 2022, other than as varied by this Deed”.
My evaluation
[24] The Supreme Court questioned whether the approach of Bradley West remains good law after the coming into effect of s 27(2) of the PLA. However, the Court did
not make a definitive finding and distinguished Bradley West on the facts.19 The Court focussed on the “exacting requirement” of s 27(2) and the definition of “contract of guarantee” in s 27(4), as “a contract under which a person agrees to answer to another person for the debt, default or liability of a third person”.20 The Court stated that “[if] the document signed by a person said to be a guarantor does not include an agreement to answer for the debt, default or liability of a third person, it is not a contract of guarantee”.21 The Court found, in respect of the same form of loan agreement as in the present case, “the loan agreement does not include any provision under which Mr Brougham agrees to answer to the trustees for the debt, default or liability of the company”.22 Rather, it concluded “the loan agreement makes it clear that a separate document to that effect is required as a condition precedent to the making of the advance”.23
[25] In the present case, unlike in Brougham, there is an additional provision included in the Loan Agreement which needs to be considered. That is the clause included in the Loan Agreement under the heading “Guarantee” set out at [21] above, which expressly refers to the “personal guarantee of Anita Lancaster”. Mr Connolly, for the second defendant, contends that this clause is simply a carve out from the obligations of the second defendant as guarantor and not operative guarantee wording for the purposes of s 27(4).24
[26] In this regard, the proper interpretation of the Loan Agreement may well be informed by the factual context — including the exchange of emails between the solicitors for the parties (referred to above at [21]) — which resulted in the additional clause.25 The email exchange includes the second defendant, as a shareholder of NFC22, being asked by NFC, as lender, to personally guarantee the loan to NFC22.
19 In Brougham v Regan, above n 4, two guarantors were named in the loan agreement, but only one signed. There was doubt as to whether it was intended that Mr Brougham would guarantee all of the indebtedness of the company, $50,000, or only $25,000 as originally contemplated. No such issues arise in the present case.
20 At [35].
21 At [35].
22 At [36].
23 At [36].
24 In Victoria Quarter No 1 Ltd v FSB Holdings Ltd & Anor [2015] NZHC 3007 at [80], the Court found that “[i]f the agreement had said “Mr McGrath guarantees the tenant’s obligations under this agreement”, or similar” that would have been sufficient for the purposes of s 27(4) of the PLA.
25 See Federal Capital Ltd v Simunovich [2023] NZHC 1500 at [34] and [38] and Simunovich v Federal Capital Limited [2023] NZCA 603 at [7] and [8].
The solicitors for the defendants then requested that the additional clause be included in the Loan Agreement. In the final email, the solicitors for the defendants forwarded the signed Loan Agreement (with the additional clause) and GSA, stating that “the contract is now unconditional”. The second defendant contends the reference to “the contract” relates to the agreement for sale and purchase of the business and satisfaction of conditions in that contract, not the conditions precedent to the advance referred to in the Loan Agreement.
[27] Further, there is a question as to whether the Assignment Agreement between NFC, NFC22, the plaintiffs and the second defendant entered into on 21 December 2022 may be admissible as mutual subsequent conduct relevant to the interpretation of the Loan Agreement.26 In that agreement, the second defendant confirmed that the personal guarantee “remains in effect on the terms set out in the Term Loan Agreement dated 31 March 2022, other than as varied by this Deed”.
[28] The issue of whether any of this extrinsic evidence is admissible or inadmissible is not appropriately determined at this stage.27 However, on the basis of the material before me, and the current state of the law, it is at least arguable that the Loan Agreement may be interpreted as constituting a contract of guarantee. Additionally, it is arguable that, in terms of the condition precedent requirements, the form of guarantee required by NFC was the Loan Agreement (with the additional provision included). I am not satisfied that the plaintiffs’ cause of action is so untenable that it cannot succeed.
Second cause of action: specific performance
[29] Alternatively, the plaintiffs plead that there should be an order for specific performance requiring the second defendant to execute a separate deed of guarantee and indemnity in an ADLS form.28 Although it is not pleaded, in his written and oral submissions Mr Barker also contends that, if the first cause of action is unsuccessful because of non-compliance with s 27(2), the second defendant should
26 Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85 at [89]; Stephen Todd and Matthew Barber (eds) Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [6.3.4(f)].
27 Simunovich v Federal Capital Limited, above n 25, at [8].
28 See Brougham v Regan, above n 4, at [64]–[67].
instead be estopped from relying on such noncompliance, and an order should be made for specific performance. I will consider the pleaded cause of action first, and then the estoppel argument.
[30] Regarding the pleaded cause of action, the second defendant submits that the relevant provision in the Loan Agreement is not a covenant to sign a deed of guarantee and indemnity, but rather the specification of a condition precedent to the making of any advance. The second defendant contends that by making the advance to NFC22 without requiring her to sign a deed of guarantee, the condition precedent was waived (as it was by the lender in Brougham). However, in Brougham, the lenders accepted that they waived the requirement for a deed of guarantee and indemnity to be signed before making the advance.29 The Court found there was no commitment in respect of which an order for specific performance could be made.30
[31] The second defendant also refers to Federal Capital Ltd v Simunovich.31 In that case, the loan agreements provided that no conditions precedent to the advance would be considered to be waived except as expressly waived in writing. Unless so waived, the performance of the condition would remain a condition subsequent to the making of the advance. The Court found that the continuing obligation may provide a basis for seeking specific performance of the obligation to sign a deed of guarantee.32
[32] In the present case, the plaintiffs do not accept that they (or NFC) waived the condition requiring the second defendant to sign a deed of guarantee and indemnity in the form required by NFC/the plaintiffs. Unlike in Federal Capital Ltd, the Loan Agreement here does not provide that any waiver must be in writing, nor that performance of the condition remains a condition subsequent to the advance if not so waived. This leaves open a legal and factual issue as to whether the condition has been waived by NFC and/or the plaintiffs and whether it has continued as a condition subsequent. In my view, it is at least arguable that the condition has not been waived and has continued as a condition subsequent.
29 At [14], [65].
30 At [65].
31 Federal Capital Ltd v Simunovich [2022] NZHC 2985 [Federal Capital Ltd].
32 At [62]–[64].
[33] Arguably, specific performance of this condition is consistent with s 27.33 It is also arguable that the condition is sufficiently certain to be enforced by way of an order for specific performance. The condition provides that the second defendant must sign a deed of indemnity and guarantee “in the form required” by the plaintiffs (as assignees). Therefore, the second defendant agreed to sign a deed of indemnity and guarantee in whatever form was required by the NFC/the plaintiffs. In the amended statement of claim, the plaintiffs’ pleading specifically requires the second defendant to execute a deed of guarantee and indemnity “based on the ADLS form second edition 2016 (3), in respect of the liabilities of NFC22 pursuant to the Loan Agreement”.
[34] In summary, I consider it is at least arguable that the condition requiring the second defendant to sign a deed of guarantee and indemnity was not waived by NFC/the plaintiffs. I also consider it arguable that the condition has continued as a condition subsequent and may be enforced by an order for specific performance. I am not satisfied that the plaintiffs’ pleaded cause of action in this regard is so untenable that it cannot succeed.
[35] As noted, Mr Barker also advances an estoppel argument if it is not accepted the Loan Agreement is an effective contract of guarantee because of noncompliance with s 27(2) of the PLA. His submission is that the second defendant should be estopped from relying on noncompliance and an order made for specific performance.34 There are obvious difficulties with this argument. First, as the Supreme Court noted in Brougham, if it is accepted that there is no guarantee under s 27(2), but the second defendant is estopped from asserting the guarantee is ineffective, s 27(2) would be undermined.35 Therefore, affirmation other than the deficient guarantee document is required.36 Second, the plaintiffs’ estoppel argument appears to be based on the affirmation of the personal guarantee by the second defendant in the Assignment Agreement entered into in December 2022. As found by the Supreme Court in Brougham, such an affirmation would need to have been made
33 Chambers v Chatfield [2016] NZHC 1871 at [46] and [50]–[51].
34 See Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567, where the Court of Appeal recognised specific performance as a remedy for estoppel. The Supreme Court declined leave to appeal — Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZSC 173, (2014) 15 NZCPR 867.
35 Brougham v Regan, above n 4, at [50].
36 At [59].
before the loan was advanced to found an estoppel.37 Whilst there are difficulties with the estoppel argument, I have found above that I am not satisfied that the plaintiffs’ pleaded cause of action for specific performance of an obligation to sign a separate deed of guarantee and indemnity is so untenable that it cannot succeed. Therefore, I do not need to consider the tenability of this alternative basis for an order for specific performance further.
[36] Finally, the second defendant contends that the order sought by the plaintiffs under the second cause of action requiring the second defendant to disclose the whereabouts of certain assets of NFC22 is irrelevant to the present proceeding. The second defendant contends that any issue regarding the recovery of the security provided by NFC22 ought to be pursued as part of separate proceedings to enforce the security rather than being “bolted on to the present proceeding”. The second defendant contends that this part of the plaintiffs’ claim should be struck out as an abuse of process. Mr Barker confirmed in oral submissions, that this is not a separate cause of action or “third leg”. Rather, it is a further order sought if the Court finds the plaintiffs are entitled to an order for specific performance as sought in the amended statement of claim.
[37] It seems to me that it is premature at this stage to consider striking out this part of the claim as an abuse of process. If, at trial, the Court dismisses the cause of action for specific performance, the proposed ancillary order may fall away. If the Court grants an order for specific performance, then that is the appropriate time to consider whether the ancillary order sought should be made, in the context of the second defendant’s obligations as guarantor.
Result
[38] The second defendant’s application for summary judgment against the plaintiffs, or in the alternative, an order striking out the plaintiffs’ first and/or second cause of action is dismissed.
37 At [61].
[39] I have not heard fully from the parties on costs. My preliminary view is that the plaintiffs have been successful and are entitled to costs on a 2B basis and reasonable disbursements. The parties should endeavour to agree costs. However, if agreement cannot be reached, memoranda may be filed not exceeding three pages (excluding costs schedules) and costs will then be determined on the papers.
[40] The matter is to be listed in the next available Associate Judge’s Chambers List for Palmerston North for a case management conference. The parties are to file a joint memorandum or separate memoranda three working days in advance of the conference addressing all relevant outstanding matters in sch 5 to the High Court Rules 2016 and seeking appropriate directions.
Associate Judge Skelton
Solicitors:
Buddle Findlay, Wellington for Plaintiffs
Wakefields Lawyers Ltd, Paraparaumu for Defendants
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