Beggs v North Face Construction 2022 Limited - [2024] NZHC 1254

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2023-454-90

[2024] NZHC 1254

BETWEEN CHRISTOPHER DAVID BEGGS and LEONIE FRANCES BEGGS
Plaintiffs

AND

NORTH FACE CONSTRUCTION 2022 LIMITED

First Defendant

ANITA MAREE LANCASTER

Second Defendant

Hearing: 30 April 2024

Appearances:

S Barker and M Garlick for Plaintiffs S Connolly for Defendants

Judgment:

20 May 2024

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[1] The plaintiffs apply for summary judgment against the first and second defendants in respect of vendor finance provided by the plaintiffs’ former company to the first defendant.

[2] The amount claimed by the plaintiffs is the outstanding sum of $574,942.22, together with interest at the default interest rate of 15 per cent per annum and costs on a solicitor-client basis.

[3] The first defendant concedes that it has not repaid the amount owed and that it has no defence to the plaintiffs’ claim for summary judgment as to liability, quantum and costs.

BEGGS v NORTH FACE CONSTRUCTION 2022 LIMITED [2024] NZHC 1254 [20 May 2024]

[4] The plaintiffs contend that the second defendant is personally liable as covenantor under a general security agreement provided as security for the loan. The second defendant disputes that she has any liability for the claimed amounts as covenantor.

[5] The issue to be determined is whether the second defendant has no defence to the plaintiffs’ claim that she is liable as covenantor under the general security agreement.

What happened?

[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 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.

[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…

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: [2024] NZHC 1254
Decision Date: 20 May 2024

CaseChat Overview and Summary

The plaintiffs, Christopher David Beggs and Leonie Frances Beggs, sought summary judgment against the first defendant, North Face Construction 2022 Limited, and the second defendant, Anita Maree Lancaster, for the recovery of vendor finance provided by the plaintiffs’ former company. The plaintiffs claimed the outstanding sum of $574,942.22, together with interest at the default interest rate of 15 per cent per annum and costs on a solicitor-client basis. The first defendant conceded it had not repaid the amount owed and had no defence to the claim for summary judgment as to liability, quantum and costs. The second defendant disputed her liability as covenantor under a general security agreement. The central issue was whether the second defendant had any defence to the plaintiffs’ claim that she was liable as covenantor under the general security agreement.

The court considered the principles governing summary judgment, including that the defendant must have no defence to the claim or part of the claim. The court noted that contractual interpretation was permissible in summary judgment proceedings if there was no real doubt or uncertainty about the defendant’s defence. The court examined the general security agreement, the loan agreement, and the general terms to determine whether the second defendant was liable as covenantor. The plaintiffs argued that the second defendant’s signing of the general security agreement as covenantor imposed primary liability on her. However, the court found that the second defendant was not a “party granting the security” under the general terms and that the second defendant’s obligations were limited to providing representations and warranties.

The court concluded that the second defendant was not a “party granting the security” and was not obliged to pay the loan amount. Therefore, the court found that the second defendant had a defence to the plaintiffs’ claim and dismissed the application for summary judgment against her. The court granted summary judgment against the first defendant for the principal sum, interest, costs, and further interest until the date of payment. The parties were to endeavour to agree on costs, and if they could not, the matter would proceed to a costs determination. The substantive proceeding would be listed for directions in the next Associate Judge’s chambers list.

Orders