Borlase v Robertson Engineering Ltd
[2022] NZHC 2533
•4 October 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-176
[2022] NZHC 2533
UNDER section 124 of the District Courts Act 1947 IN THE MATTER OF
an appeal against a decision of the District Court
BETWEEN
CHARLES EDWIN DAVID BORLASE
Appellant
AND
ROBERTSON ENGINEERING LTD
Respondent
Hearing: 3 October 2022 Counsel
P J Drummond for Appellant G Manktelow for Respondent
Judgment:
4 October 2022
JUDGMENT OF CHURCHMAN J
Introduction
[1] On 22 March 2022, Judge Tompkins in the Hutt Valley District Court awarded summary judgment in favour of the plaintiff, Robertson Engineering Ltd (REL) against the defendant, Mr Borlase, for a sum of $82,519.83.1 REL is an engineering company which leases helicopters and provides engineering services to helicopter owners. REL entered into a Heads of Agreement (HoA) for the lease, for a period of 12 months, of a helicopter and the provision of equipment and engineering services, with Command Aviation Limited (CAL). That company was placed into liquidation on 27 February 2020. CAL has a remaining indebtedness to REL in respect of
1 Robertson Engineering Limited v Borlase [2022] NZDC 3512.
BORLASE v ROBERTSON ENGINEERING LTD [2022] NZHC 2533 [4 October 2022]
lease/rental payments. The HoA was undated. In the District Court, the plaintiff asserted that the HoA was signed on 26 July 2017, the defendant claimed it was 27 July 2017. Nothing turns on the date.
[2] Summary judgment was given on a personal guarantee given by Mr Borlase in an email dated 15 February 2018.
[3] The defendant, Mr Borlase, the director of CAL, appeals that decision on the grounds that:
(a)the District Court erred in fact and law by finding that he did not have a bona fide defence or fairly arguable defence; and
(b)the District Court erred in law as to the interpretation of the guarantee, the subject of the claim.
[4] REL opposes the appeal, and says that the District Court did not err. REL submits that Mr Borlase is unable to show an arguable defence, and that the appeal should be dismissed.
[5]For the reasons below, I am of the view that the appeal should be dismissed.
Background
Factual background
[6]It is accepted as between the parties that:
(a)Maurice Wooster is REL’s director;
(b)as of October 2018, CAL owed REL approximately $76,674.90;
(c)Mr Borlase was CAL’s director. CAL was liquidated by REL in the Palmerston North High Court on 27 February 2020;
(d)the liquidation of CAL, resulted in a costs order in favour of REL, in the sum of $5,844.93; and
(e)on 15 February 2018, Mr Borlase sent Mr Wooster an email creating a personal guarantee, which is the subject of these proceedings.
[7] The subject line of Mr Borlase’s email read “Personal Guarantee”. The balance of the email was in the following terms:
Good morning Maurice,
Thanks for the opportunity to explain my situation to you yesterday.
As a result of that discussion, I would like to advise you that I give an unconditional Personal Guarantee in regards to any moneys owed by [CAL] to you for the lease of HPE (the Helicopter) and the associated equipment.
I also give an undertaking that by the end of this I will have all my lease arrangements with you up to date.
Kind regards,
Dave
[8] The footer of the email illustrates that Mr Borlase sent the email in his capacity as the director of CAL. REL’s application for summary judgment, seeking $82,519.83 plus interest, was entirely in reliance on Mr Borlase’s email of “personal guarantee”.
District Court decision
[9] In the District Court, Mr Borlase originally accepted the enforceability of the personal guarantee, but argued that he had an equitable set-off, exceeding the amount claimed by REL. He later adopted the position that the guarantee was unenforceable for want of consideration and that it did not encompass the indebtedness claimed by REL. He alleged that the guarantee was not in favour of REL, but Mr Wooster personally. In respect of these assertions, the Judge stated:
[10] Although the text of the email sent by Mr Borlase to Mr Wooster on 15 February 2018 contains a number of (grammatically speaking) dangling pronouns – the pronoun ‘you’ as used by Mr Borlase could conceivably refer to Mr Wooster personally or [REL]; and ‘owed’ could refer to monies owed as at 15 February 2018 only, or owed from time to time as the parties’ commercial relationship continued – in its context, the meaning of the
personal guarantee is crystal clear. By his email, Mr Borlase guaranteed such moneys as were owed from time to time by [CAL] to [REL] in the context of their ongoing commercial contractual arrangement. This contractual arrangement encapsulated both the initial ‘heads of agreement’ contract in relation to the leasing of the helicopter and the parties’ subsequent commercial dealings relating to that ongoing contractual relationship.
[10] The Judge was also of the view that the guarantee was not unenforceable for want of consideration, as Mr Wooster’s evidence established that in consideration of the guarantee, REL agreed not to take legal action to recover the outstanding debt
[11] Mr Borlase’s claim of an equitable set-off was also considered by the Judge to be without foundation. The Judge stated:2
…Mr Borlase claims a set off by way of as yet unassigned debts asserted to be owed by [REL] to [CAL], for fuel supply, flying services, and loss of business following non-compliance with the requisite contractual notice.
In answer, [REL] points to a number of problems with the existence of the asserted debts, in particular that the:
· “invoices” in relation to the alleged supply of fuel appear to have been rendered in mid-November 2019, for asserted supply of fuel in June and September 2018;
· that the alleged invoice for a pilot transfer on 7 June 2018 was not tendered until early November 2019;
· that “flying services” were charged out at a per hour cost of $2,350 plus GST, compared to the contractual rate under the heads of agreement between the parties of $1,350; and
· perhaps of most substance, the asserted “invoice” dated 5 November 2019 claiming [some] $64,000 together with GST of $9,600, totalling $73,600, is for:
breach of contract: specifically failure to provide eight weeks’ notice to terminate the agreement as per Clause 5(i)(ii) of the heads of the agreement based on lost revenue at an average of $8,000 per week for eight weeks from 5 May 2018
It will be seen immediately that this last asserted “invoice” is more properly a claim for contractual damages and is unsupported by any evidential foundation. As counsel for [REL] noted, ironically, the total of the asserted “invoices” is seemingly designed to exceed (by a modest margin) the amount claimed under the guarantee. Counsel also noted that claims are advanced for loss of revenue for a period when the helicopter in question was due for a scheduled and required rebuild.
2 At [13]-[16].
In summary, on the evidence before the Court the asserted equitable setoff is lacking in substance, speculative, and unsupported by the kind of evidence which would enable the Court property to conclude that it was anything other than an illusory structure manufactured solely in an endeavour to defeat [REL’s] claim.
[12] On that basis, the Judge was satisfied that Mr Borlase had no defence to REL’s claim for summary judgment. It is also relevant to note that the claimed debt was owed to CAL not Mr Borlase personally, and, even if it were genuine, would not have provided Mr Borlase personally with a right of set-off.
Positions of the parties
Mr Borlase
[13] Counsel for Mr Borlase, Mr Drummond, accepts that Mr Borlase’s email meets the formal requirements for a guarantee, and contains a sufficient signature pursuant to s 226 of the Contract and Commercial Law Act 2017. However, he advances three grounds of appeal, being that:
(a)while valid, the guarantee was in favour of Mr Wooster personally, rather than REL;
(b)the guarantee was retrospective, not prospective in nature, and so the amounts sought to be recovered that post-date the guarantee are not covered; and
(c)the guarantee was for a limited purpose, namely the “lease of HPE (the Helicopter) and the associated equipment”, meaning that REL’s claim for “the supply of goods and services”, and the claim for costs of the liquidation, are not covered.
[14] Mr Drummond submits that the guarantee names Maurice Wooster as the creditor, rather than REL. He says that REL is not a party to the guarantee as it is not named. He submits that REL has misinterpreted the guarantee. Mr Drummond submits that the Judge erred in deciding that Mr Borlase guaranteed moneys owed by CAL to REL in the context of their relationship, as that is not what the guarantee says.
He says that had the parties wanted to make the guarantee in favour of REL, then it could be reasonably expected that the guarantee would plainly say that. He submits that it was not open to the Judge to effectively extend the guarantee to a third party that is not referred to in the guarantee.
[15] Mr Drummond submits that the use of the term “moneys owed” means that what was guaranteed was any money owed as at the date of the email, being 15 February 2018. He says that the guarantee clearly indicates that it applies only to debts already incurred, and that if the guarantor was to be liable for prospective debts, the wording should have been “all monies which are now or may, from time to time hereafter, be owing or remain unpaid”. Mr Drummond submits that each of the invoices referred to in REL’s application post-date the guarantee by approximately eight months, as did the costs of the liquidation. He says that the Judge erred by interpreting the word “owed” as meaning “owed from time to time”, thereby extending the scope of the guarantee beyond what was intended.
[16] Finally, Mr Drummond submits that the limited purpose of the guarantee means that the money claimed by REL falls outside of the ambit of the guarantee. He says that debts owed for the supply of “goods and services” and for costs ordered in the liquidation of CAL do not fall within the description in the guarantee, which was for a particular service, being “the lease of HPE (the Helicopter) and associated equipment”. He submits it cannot be ascertained from the evidence what money relates to goods and what money relates to services, and that therefore it is unclear whether the debts are within the scope of the guarantee.
[17] In arguing the appeal, Mr Drummond did not suggest that Mr Borlase has any form of equitable set-off.
REL
[18] Counsel for REL, Mr Manktelow, submits that the Judge did not err; that Mr Borlase’s position on appeal is unsupported by his own evidence; and that he has raised defences not included in his Notices of Opposition or Notice of Appeal. He says that it is clear on the terms of the guarantee that Mr Borlase was personally guaranteeing CAL’s indebtedness to REL.
[19] In respect of Mr Borlase’s argument that his indebtedness is limited to the debt owed as at the date of his email, Mr Manktelow refers to the third paragraph of the email, which states “I also give an undertaking that by the end of this I will have all my lease arrangements with you up to date”. He says that this is clearly a statement which is prospective in nature, and that Mr Borlase in his evidence has not illustrated any belief that the guarantee was temporally limited.
[20] As to the argument that the guarantee was limited to specific purposes, Mr Manktelow submits that this is a defence not raised in Mr Borlase’s Notice of Opposition or evidence. However, he says that the phrase ‘goods and services’ is sufficiently wide to encompass the debts owing to REL for unpaid rental/lease payments under the HoA. He submits that in any event, in his evidence Mr Borlase accepted that the debt was for the same unpaid rental/lease payments.
Approach to appeal
[21] Pursuant to s 124(2) of the District Court Act 2016, a party to a proceeding in the District Court may appeal to the High Court against the whole or part of a decision. General civil appeals are by way of rehearing.3 The appellant bears the onus of satisfying the appellate court that it should differ from the decision under appeal.4 In discharging that onus, the appellant must identify the respects in which the judgment under appeal is said to be in error.5 The appellate Court may arrive at its own assessment of the merits of the case.6
Analysis
[22] The standard to be applied on an application for summary judgment is well established. The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence.7 The standard to apply is not in dispute as between the parties. The issues on appeal revolve solely around the Judge’s interpretation of the guarantee.
3 High Court Rules 2016, r 20.18.
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].
5 At [4].
6 At [5]; see also High Court Rules 2016, r 20.19.
7 High Court Rules 2016, r 12.2.
The object of the guarantee
[23] The issue is whether the word “you”, in the email addressed to Mr Wooster, can be taken to mean Mr Wooster personally, or whether it refers to REL. The District Court Judge referred to the use of the term “you” in this fashion as a ‘dangling pronoun’. I accept that on the bare terms of the guarantee, there is potentially some ambiguity. Mr Drummond argues that if Mr Borlase intended to personally guarantee the debts of CAL to REL, he would have made that abundantly clear. However, the problem for Mr Borlase is that there is no suggestion that CAL was ever in a commercial relationship with Mr Wooster personally or was indebted to him personally in any way. The debt being guaranteed can only have been the debt from CAL to REL.
[24] In circumstances of ambiguity, contractual relationships are interpreted in light of all of the circumstances that are reasonably within the contemplation of the parties at the relevant time. The terms used must be read in the context of a document holistically as well as all of the relevant circumstances.8 The email was clearly sent by Mr Borlase, in his capacity as director of CAL, to Mr Wooster, in his capacity as director of REL, in circumstances in which CAL was indebted to REL. In these circumstances, it was entirely open to the Judge to conclude that, by way of his email, Mr Borlase was personally guaranteeing the debt owed by CAL to REL. That is the only reasonable interpretation of the guarantee in light of the circumstances at that time. Mr Wooster’s evidence shows that in response to the provision of the guarantee, REL agreed to take no legal action as to the recovery of the debt. That is also consistent with the debt being personally guaranteed by Mr Borlase to REL.
[25] It seems now that Mr Borlase seeks to rely on the grammatical ambiguity of his own words in order to justify a conclusion that he is not personally liable to REL. This position conflicts with the longstanding principle that ambiguous wording is resolved against the party who wrote them.9
8 Vector Gas v Bay of Plenty Energy [2010] NZSC 5, [2010] 2 NZLR 444.
9 Gault on Commercial Law (online looseleaf ed, Thomson Reuters) at [CC5.04(9)].
[26] Accordingly, I am satisfied that the Judge did not err in deciding that Mr Borlase’s guarantee was made in favour of REL, rather than Mr Wooster personally. In doing so, the Judge was not adding an unknown and unnamed party to a guarantee to which Mr Wooster personally had a beneficial right, but rather duly recognising that in the circumstances, the guarantee was clearly in favour of REL.
The extent of the guarantee
[27] Mr Borlase’s argument is that the guarantee only covers debts owing as at 15 February 2018. I do not accept that submission, for the same reasons as in respect of the first issue.
[28] The third paragraph of the email colours the overall guarantee with a prospective undertaking to pay all debts owing in respect of the lease arrangements between CAL and REL. The Judge did not err by extending the scope of the guarantee beyond what was intended.
[29] The guarantee was, on its terms, intended to guarantee to REL that Mr Borlase would pay the full extent of CAL’s liability to REL, irrespective of the date at which that liability arose. Mr Borlase gave an undertaking to that effect, which he has not fulfilled. It is not arguable that the guarantee he proffered only related to sums already outstanding.
The purpose of the guarantee
[30] I conclude that it was clearly established that the debts owed to REL by CAL are a result of unpaid rental/lease payments. The sole business relationship between CAL and REL was the helicopter lease. There was no evidence at all of any other business dealings that the invoices could have referred to. I accept Mr Manktelow’s submission that such payments clearly come within the description of ‘goods and services’. There was no suggestion that, at the time of receipt of the invoices, Mr Borlase was under an illusion that they referred to something other than sums due in respect of the helicopter lease.
[31] The terms of the guarantee show clearly that the subject of the guarantee was the rental/lease payments. That is the debt that is sought by REL. How REL chose to describe the debt on the invoices is entirely irrelevant to whether or not the guarantee is enforceable, given that at all times REL has sought payment for the unpaid lease payments. Nor has there been confusion on the part of Mr Borlase as to what CAL’s debt related to. Mr Borlase’s argument on this point is similarly without merit, and I am satisfied that it does not constitute an arguable defence.
Costs order
[32] I am also satisfied that the terms of the guarantee entitle REL to claim from Mr Borlase personally, the costs order that was awarded against CAL upon its liquidation. That costs order, in my view, can be considered “moneys owed by [CAL] to [REL] for the lease of HPE (the Helicopter) and the associated equipment”, being costs incurred in seeking to enforce their rights under the HoA. That costs order is logically connected to Mr Borlase’s residual personal indebtedness to REL, and accords with his undertaking to “have all my lease arrangements with you up to date”. The Judge did not err in including the costs order within the amount awarded to REL by way of summary judgment.
Conclusion
[33] I am satisfied that the District Court Judge did not err, and that Mr Borlase has no arguable defence in respect of REL’s claim for the debt relating to the rental/lease payments, and the costs order upon CAL’s liquidation. The appeal is dismissed.
[34] I invite the parties to settle costs but in the absence of agreement, the respondent is to file a memorandum within 14 days with the appellant to file a reply within seven days of service of the respondent’s memorandum. I will then deal with the matter on the papers.
Churchman J
Solicitors:
Wadham Partners, Palmerston North for Appellant G W D Manktelow, Lower Hutt for Respondent
cc: P J Drummond
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