Chambers v Chatfield - [2016] NZHC 1871

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-000245 [2016] NZHC 1871

IN THE MATTER OF the District Courts Act 1947

BETWEEN

SHANNON GORDON NICHOLAS CHAMBERS

Appellant

AND

GREGORY CHARLES CHATFIELD and BRUCE GREGORY HANCOCK Respondents

Hearing: 2 June 2016

Counsel:

M J W Lenihan for the Appellant
G D Stringer for the Respondents

Judgment:

15 August 2016

JUDGMENT OF EDWARDS J

This judgment was delivered by Justice Edwards on 15 August 2016 at 12.30 pm, pursuant to
r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel: M J W Lenihan, Auckland

Solicitors: Inder Lynch, Papakura

Copy To: Franklin Law Limited (K P House), Pukekohe

CHAMBERS v CHATFIELD [2016] NZHC 1871 [15 August 2016]

Introduction

[1] Mr Chambers signed an Agreement to Lease containing a covenant to enter into a guarantee, and a covenant to execute a Deed of Lease. A Deed of Lease was prepared and apparently signed by Mr Chambers, although an executed copy has never been located.

[2] The covenant to enter into a guarantee was enforced against Mr Chambers in the District Court. The principle in Inglis v Clarence Holdings Ltd was applied so as to treat the parties as being in the same position as if a deed, and a guarantee, had been formally executed.1

[3] Mr Chambers appeals on the ground that Inglis is no longer applicable in light of s 27 of the Property Law Act 2007 (PLA), which now governs contracts of guarantee.

Background

[4] The respondents are trustees of the M J Bouman Family Trust (trustees). They were the owners of a commercial property at 179 Harris Road, East Tamaki.

[5] On 7 June 2012, the trustees entered into an Agreement to Lease part of the property to Hyline Construction Ltd (Agreement to Lease). Mr Chambers, the appellant, was a director of Hyline Construction (now in liquidation).

[6] The Agreement to Lease provided that Hyline Construction would lease the property from the trustees for a period of three years, with two rights of renewal. The commencement date was 11 June 2012. The annual rental was $52,000 plus outgoings and GST.

[7] Clauses 10 and 11 of the Agreement to Lease provided as follows:

1 Inglis v Clarence Holdings Ltd [1997] 1 NZLR 268 (CA).

10. Deed of Lease

The Lessor and the Lessee agree to complete a formal Deed of Lease. Subject to this Agreement, the Lease shall be on the terms of the Auckland District Law Society Deed of Lease 5th Edition 2008 (“Lease”).

Each party shall be responsible for its own Solicitors cost in respect of this Agreement and the deed of Lease.

11. Guarantee

Where the Lessee is a limited liability company, the personal guarantees and indemnities of each of the directors, and/or major shareholders of the Lessee Company as the Lessor requires (jointly and severally if more than one) shall be arranged by the Lessee to the performance of the terms and conditions of the Lease.

[8] The Agreement to Lease…

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.

Continue reading Chambers v Chatfield

Details

AGLC: Chambers v Chatfield [2016] NZHC 1871
Case: [2016] NZHC 1871
Decision Date: 15 August 2016

CaseChat Overview and Summary

The appeal by Mr Chambers against a judgment of the District Court is dismissed. The respondent is entitled to costs. The issue was whether an appeal from a District Court decision enforcing a guarantee clause in an agreement to lease should be allowed. The agreement to lease contained a covenant to enter into a guarantee, and a covenant to execute a deed of lease. The covenant to enter into a guarantee was enforced against Mr Chambers in the District Court. The principle in Inglis v Clarence Holdings Ltd was applied so as to treat the parties as being in the same position as if a deed, and a guarantee, had been formally executed. Mr Chambers appeals on the ground that Inglis is no longer applicable in light of s 27 of the Property Law Act 2007 (PLA), which now governs contracts of guarantee. The court found that the covenant to enter into a guarantee was not a guarantee itself, but rather a covenant to procure a guarantee. The court held that s 27 of the PLA did not render the principle in Inglis obsolete. The equities of the position favoured specific performance of the Agreement to Lease. The court held that specific performance of the covenant was consistent with the requirements of s 27 in its view. Such an order would require Mr Chambers to fulfil his obligation to sign the Deed containing the contract of guarantee. That would meet the requirements of s 27 so as to make the contract of guarantee enforceable. The principle in Walsh v Lonsdale applies so that the parties are to be treated as if that step had been taken. In that context, specific performance of the covenant is in furtherance of the purpose underlying s 27, and is not at odds with it.

Orders