Chapman v Westpac New Zealand Limited
[2018] NZHC 1986
•6 August 2018
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2017-419-000049
[2018] NZHC 1986
UNDER Section 124 District Court Act 2016 BETWEEN
FRASER GLANVILLE BADEN CHAPMAN
Appellant
AND
WESTPAC NEW ZEALAND LIMITED
Respondent
Hearing: 30 July 2018 Appearances:
G Bradford for the Appellant
B Upton and S Hawkesworth for the Respondent
Judgment:
6 August 2018
JUDGMENT OF GORDON J
This judgment was delivered by me on 6 August 2018 at 4 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: M J Walmsley, Paeroa
Simpson Grierson, Auckland
CHAPMAN v WESTPAC NEW ZEALAND LTD [2018] NZHC 1986 [6 August 2018]
Introduction
[1] The appellant, Fraser Chapman, appeals a decision of Judge Menzies in the Hamilton District Court granting summary judgment against him for amounts owing pursuant to a guarantee.1
[2] Mr Chapman submits that the respondent, Westpac New Zealand Limited (the Bank), did not discharge its obligation of satisfying Judge Menzies that there was no arguable defence to its claim. His overall submission is that he has an arguable defence in relation to the certification on the guarantee. The District Court Judge was therefore wrong in law to grant summary judgment.
[3]The Bank opposes the appeal.
Background
[4] Mr Chapman was the majority shareholder and sole director of Edenham Developments Limited (in liquidation) (the Company).
[5] Mr Chapman guaranteed the obligations of the Company to the Bank under a guarantee and indemnity dated 17 March 1995 (the Guarantee). Mr Chapman signed the Guarantee in the presence of two bank officers of the Bank.
[6] The Guarantee contains a certification to the effect that the bank officers explained the nature, effect and obligations of the Guarantee to Mr Chapman, that Mr Chapman said he understood that explanation, and that the bank officers were satisfied that Mr Chapman understood the nature and effect of the obligations. Mr Chapman says that no such explanation was given to him.
[7] In 1996, Mr Chapman and his wife obtained a mortgage from Trust Bank New Zealand Limited over the matrimonial home which he and his wife had purchased in 1980.
1 Westpac New Zealand Ltd v Chapman [2018] NZDC 2586.
[8] On 18 April 1996, the Trust Bank New Zealand Limited mortgage vested in Westpac Banking Corporation by Court order. This followed the purchase by Westpac Banking Corporation of Trust Bank New Zealand Limited’s banking business.
[9] On 2 November 2006, the mortgage vested in the Bank by virtue of the Westpac New Zealand Act 2006. The debt of the Company is not secured by the mortgage which only secures the personal borrowing of Mr and Mrs Chapman.
[10] On 7 November 2007, the Bank advanced the sum of $42,000 to the Company under the Company’s overdraft facility.
[11] On 5 December 2015, the Company went into liquidation. The Bank sought to enforce the Guarantee against Mr Chapman by way of a summary judgment application for amounts totalling $68,742.28.
Summary judgment
[12] There is no issue between the parties on the test for summary judgment which is contained in r 12.2(1) of the District Court Rules 2014:
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.
[13] As the onus of proof is on the plaintiff, the Bank had to prove on the balance of probabilities that Mr Chapman has no arguable defence.
[14] As the Court of Appeal in Krukziener v Hanover Finance Ltd stated, there must be no real question to be tried.2 The Court further commented:
[26] … 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 … 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 …
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
[15] Once it is established that a defendant has no defence to a plaintiff’s claim, the Court should not exercise its discretion to refuse summary judgment unless it can be shown that summary judgment would cause injustice. Mr Chapman does not rely on the residual discretion in this case.
District Court decision
[16] As already noted, the Bank applied for summary judgment against Mr Chapman pursuant to the Guarantee for amounts owing by the Company.
[17] Mr Chapman opposed the application on the basis that it was reasonably arguable on the evidence that the certification was false because he was certain that the bank officers did not explain the nature, effect and obligations of the Guarantee to him. He pointed to the fact that the Bank had no evidence from the bank officers involved to counter his testimony.
[18] Mr Chapman also argued that the Bank failed to advise him to seek independent legal advice prior to signing the Guarantee.
[19] Judge Menzies found in favour of the Bank, granting the summary judgment application.3 The Judge held that even if the certification was incorrect or the advice was not provided as certified, Mr Chapman would not have a defence to the Bank’s claim. The Judge referred to the Bank’s reliance on Shivas v Bank of New Zealand,4 and held that the Bank was, at law, under no obligation to explain the meaning and effect of the Guarantee, nor to warn Mr Chapman about the risks of entering the Guarantee, nor recommend that he obtain legal advice:
[34] … There is long established authority relieving banks of the overall obligation to provide advice about the effects and implications of guarantees in these circumstances. The inclusion of the type of certificate in question is a voluntary step on the part of a bank and I consider the analogy with the banking code is an appropriate one. Even if as a matter of fact it were determined that the plaintiff officers did not provide the certified advice, I do not accept those circumstances give rise to a defence to the claim. I am reinforced in that view by the fact this was an unexceptional commercial transaction between a business persons [sic] guaranteeing the debts of a company that he owned and controlled. Matters that have been raised by way
3 Westpac New Zealand Ltd v Chapman, above n 1, at [36].
4 Shivas v Bank of New Zealand [1990] 2 NZLR 327 (HC).
of defence such as the defendant’s age and risk to matrimonial home were not matters of concern at the time the deed was signed.
[35] I therefore accept that there is no justification for declining summary judgment on the basis of a factual determination as to what was or was not said by the bank officers at the time of the certification. If the certificate were correct, there would be no defence. If the certificate were shown to be incorrect, there would be no enforceable legal consequences arising.
[20] Judge Menzies also found there was no direct link between the Guarantee and the matrimonial home:
[30] The main focus of the defendant’s concern is the potential impact on the matrimonial home of the defendant’s liability under the guarantee. The defendant has deposed that had he been aware of the risks to the matrimonial home (in other words had those risks been identified by the officers) the defendant would have approached matters on a different basis and looked at alternative security. The difficulty with this argument is that the guarantee is not directly linked to any security documents over the matrimonial home. The sequence of events agreed by counsel is that the plaintiff’s mortgage over the matrimonial home was registered against the title to that property some 13 months after the guarantee was signed. Therefore the risk to the matrimonial home (if any) arose when the mortgage documents were signed after the guarantee. The bank officers therefore would not have been in a position to offer advice about risk to the matrimonial home as there was no such identifiable risk at the time of the guarantee.
Grounds of appeal
[21]Mr Chapman submits that Judge Menzies erred in law by finding that:
(a)if the certification in the Guarantee was incorrect, no legal consequences for the Bank arose because there was no obligation on the part of the Bank to explain anything to a guarantor;
(b)the Bank had discharged its obligations in terms of the summary judgment principles that Mr Chapman had no arguable defence; and
(c)at the time the Guarantee was signed, there was no identifiable risk to Mr Chapman’s home.
[22] Mr Chapman’s argument relies on the proposition that the Bank needed to establish that the certification was correct and that because he contests the validity of
the certification, thus creating a factual contest for trial, there is an arguable defence and accordingly no ability for a Court to grant summary judgment.
[23] Mr Chapman also submits that because the Bank relied on the certification as part of its case, the Bank is now estopped from asserting that the existence of the certification is not essential to its case.
The opposition
[24] Mr Upton, for the Bank, submits that the existence of the certification (and whether or not the matters certified were actually explained) is not a necessary element of a cause of action based on a guarantee. The necessary elements are that:
(a)The guarantor has guaranteed the obligations of a third party to the lender;
(b)The guarantee is in writing and signed by the guarantor;
(c)The third party defaults on its obligations to the lender;
(d)Demand is made on the guarantor under the guarantee; and
(e)That demand is not met.
[25] None of those matters is contested by Mr Chapman and accordingly it follows that even if he can create a factual dispute around whether the certification is correct or not, it makes no difference.
[26] The Bank did not pursue the argument made in the District Court, that in the circumstances, where Mr Chapman’s claims are inconsistent with the executed documents, the Court should take a robust and critical approach to his evidence.
[27] As to Mr Chapman’s argument based on an estoppel, the Bank says that there is no proper basis for asserting estoppel. If a fact relied on is not an essential element of a cause of action, as a matter of law, then whatever importance the Bank placed on
that fact is irrelevant. The Court did not need to have that fact established in order to enter judgment and the District Court Judge correctly followed that approach.
Approach on appeal
[28] Section 124(2) of the District Court Act 2016 provides Mr Chapman with a right of appeal to this Court.
[29] Section 127 of that Act provides that the appeal must be by way of rehearing. Rule 20.18 of the High Court Rules also provides that appeals are to be by way of rehearing. Mr Chapman is, therefore, entitled to judgment in accordance with the independent opinion of this Court based on the material before the District Court Judge.5 Mr Chapman ultimately bears the onus of persuading the Court to reach a different conclusion.6
The obligation on the Bank
[30] The first and second grounds of appeal are linked, and I will deal with them together. Mr Chapman’s first ground of appeal relates to the legal principles surrounding the nature of the obligations placed on banks when entering into contracts of guarantee with customers. His second ground of appeal concerns the application of those obligations to this case.
The law
[31] The leading case on contracts of guarantee between banks and customers is the decision of Tipping J in Shivas v Bank of New Zealand.7 Tipping J first stated that contracts of guarantee between a bank and a guarantor, even if the guarantor is a customer of the bank, “is not a contract of the utmost good faith”.8
[32] Contracts of utmost good faith, or contracts uberrimae fidei, require the party with full knowledge of all the material facts to make full disclosure of all those
5 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
6 Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [30].
7 Shivas v Bank of New Zealand, above n 4.
8 At 363.
material facts to the other party.9 But, as the learned authors of Burrows, Finn and Todd on the Law of Contract in New Zealand explain:10
A contract of guarantee between a bank and a guarantor is not a contract uberrimae fidei even if the guarantor is a customer of the bank …
[33] In Gilles Bakery Ltd v Gillespie, the Court of Appeal, citing Shivas, stated that it is “well established a lender is under no general duty of disclosure to a commercial guarantor”.11 Nicholls LJ explained the reason for this in Royal Bank of Scotland plc v Etridge (No 2):12
[88] Different considerations apply where the relationship between the debtor and guarantor is commercial, as where a guarantor is being paid a fee, or a company is guaranteeing the debts of another company in the same group. Those engaged in business can be regarded as capable of looking after themselves and understanding the risks involved in the giving of guarantees.
[34] In Shivas, Tipping J commented on the obligations placed on banks when entering into contracts of guarantee. Put simply, the bank “is bound to disclose to the intending surety only something which has taken place between the bank and its customer which would not normally be expected”.13 It does not have a positive duty to explain, warn or to recommend separate advice.14
[35] The learned authors of Burrows, Finn and Todd on the Law of Contract in New Zealand endorse this position:15
… But there is a limited duty of disclosure on the bank. It must disclose to the intending guarantor anything which has taken place between the bank and its customer which would not normally be expected.
9 See Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [11.4.2].
10 Finn, Todd and Barber, above n 9, at [11.4.3(a)].
11 Gilles Bakery Ltd v Gillespie [2015] NZCA 93 at [89].
12 Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773.
13 Shivas v Bank of New Zealand, above n 4, at 363.
14 At 368.
15 Finn, Todd and Barber, above n 9, at [11.4.3(a)]. See also Dorchester Finance Ltd v Christchurch Foodcourts Ltd HC Auckland CIV-2005-404-6193, 3 September 2010 at [159](d); Royal Bank of Scotland plc v Etridge (No 2), above n 12, at [118]; Wayne Courtney, John Phillips and James O’Donovan The Modern Contract of Guarantee (3rd ed, Sweet & Maxwell, London, 2016) at [4- 001]-[4-021]; Simon Whittaker “Suretyship” in HG Beale (ed) Chitty on Contracts: Volume II Specific Contracts (32nd ed, Sweet & Maxwell, London, 2015) 2167 at [45-036]-[45-038].
[36] The Court of Appeal, in Scales Trading Ltd v Far Eastern Shipping Co Public Ltd, termed this a duty of disclosure of “unusual aspects”.16 As it explained:17
… What is or is not "unusual'' is always a question of fact, tempered by common sense. It will depend to a major extent upon context …
[37] The position will clearly be different, however, if the “intending surety makes a specific request for information or advice from the bank and the bank responds”.18
[38] Ultimately, the bank’s duty of disclosure “must be assessed against what the bank might reasonably have expected the intending guarantors to know already or to be able to ascertain without difficulty should they have been minded to do so”.19 As White J commented in Dorchester Finance Ltd v Christchurch Foodcourts Ltd:20
(e)Whether or not a particular fact needs to be disclosed by a creditor to a guarantor will be dependent on the precise circumstances of the particular case, but, in general terms, it can be said that there is no obligation to volunteer information about the object or expected use of the advance secured by the guarantee, the purpose of the guarantee itself, any anticipated difficulties which the principal debtor may have in discharging the principal obligation (including any such difficulties which may arise as a result of the actions of third parties) and the likely future indebtedness or liability of the principal debtor to the creditor …
[39] There are situations, however, where the guarantor can legitimately challenge the guarantee. In Shivas, Tipping J outlined those circumstances:21
A guarantor who is concerned at the circumstances in which he has given a bank guarantee will be able to complain should any of the following circumstances be present — deceit by the bank, misrepresentation, negligence if advice or information is sought and given or volunteered by the bank in a careless manner, breach of fiduciary duty in terms of Hamilton v Watson, [where there are unusual features relating to the account to be guaranteed] unconscionable bargain, mistake and undue influence …
16 Scales Trading Co Ltd v Far Eastern Shipping Co Public Ltd [1999] 3 NZLR 26 (CA) at 33. The Privy Council overturned the decision on appeal, but it was not on this point and it did not comment on the legal position: Scales Trading Ltd v Far Eastern Shipping Co Public Ltd [2001] 1 NZLR 513 (PC).
17 At 34.
18 Shivas v Bank of New Zealand, above n 4, at 363. See also Gilles Bakery Ltd v Gillespie, above n 11, at [89].
19 At 363.
20 Dorchester Finance Ltd v Christchurch Foodcourts Ltd, above n 15, at [159].
21 Shivas v Bank of New Zealand, above n 4, at 368. See also Whittaker, above n 15, at [45-031] and [45-039].
Analysis
Grounds One and Two
[40] On the signing page of the Guarantee, there is the following certification by the two bank officers:
We Christopher Ross Balshaw and Andrea McGhie being officers of Westpac Banking Corporation, Thames branch, hereby certify that the nature and effect of this Guarantee and the obligations imposed thereunder were fully explained to Fraser Glenville Baden Chapman before the execution therefore and he has stated to us that he fully understands and he appears to us to fully understand such nature and effect and obligations.
[41] There is no issue that this is a contract of guarantee. The certification states that the bank officers explained the nature, effect and obligations under the Guarantee to Mr Chapman.
[42] As already noted, Mr Chapman disputes this. He submits that he never confirmed in writing that he understood the explanation. He says the certification is not accurate and that he was not given any type of advice contemplated in the certification. He relies on the fact that the Bank did not put in evidence any notes or diary entries of what was fully explained.
[43] As the legal position outlined above makes clear, there was no duty or obligation on the bank officers to fully explain the nature and effect of the Guarantee, and the obligations thereunder (absent any of the Shivas circumstances to which I will shortly refer).
[44] Mr Bradford, appearing for Mr Chapman, accepted in his oral submissions that (leaving aside the issue of estoppel), and assuming that no explanation was given by the bank officers as to the effect of the Guarantee, in order to succeed, Mr Chapman would need to bring himself within one or more of the circumstances in Shivas.22 Mr Bradford submits that this is where the District Court Judge fell into error, namely by failing to have regard to and apply the relevant circumstances in Shivas.
22 Shivas v Bank of New Zealand, above n 4, at 368.
[45] Mr Bradford submitted that the Guarantee should be voided in this case on the basis of misrepresentation, carelessness/negligence, and possibly deceit. In his written submissions, Mr Bradford also relied on mistake, but he abandoned that ground in the course of his oral submissions.
[46] I do not consider that Mr Chapman can point to an arguable basis for any of these claims. I will address each in turn, but first refer to Mr Bradford’s submission, which is at the heart of all three of the claimed Shivas circumstances on which Mr Chapman relies. Mr Bradford submits that the bank officers took it upon themselves to include the certificate in circumstances where they had not in fact explained the nature and effect of the Guarantee. That then created a duty on the part of the bank officers to explain the nature and effect of the Guarantee.
[47] In particular, he says the bank officers should have advised Mr Chapman that the matrimonial home was at risk (I address that issue in the context of the third ground of appeal). Mr Bradford submits that the entry of the certificate was gratuitous. If it had not been included, he says, “We would not be here”.
[48] I first address the claim of misrepresentation. A pre-contractual representation requires a clear misrepresentation that has been understood as a reasonable person would understand it, is false, and is intended to induce the claimant to enter into the contract.23 In this case, Mr Chapman does not refer to a specific positive representation made by the bank officers, nor how any misrepresentation induced him to enter into the Guarantee. His evidence is that the Bank made no representations at all.
[49] As to any misrepresentation by silence, silence does not constitute a misrepresentation unless there is a duty to speak. It is here that Mr Bradford says there was a duty. Having said in the certificate that the nature and effect of the Guarantee had been explained, this created a duty to in fact explain and the bank officers did not do so.
23 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd (No 2) [2016] NZHC 2838, [2017] 2 NZLR 538 at [83]. See also Finn, Todd and Barber, above n 9, at [11.2.1].
[50] In Shivas, one of the causes of action pleaded was a cause of action framed in tort. It was pleaded in that case that the bank owed the plaintiffs a duty of care in tort to (inter alia) advise the plaintiffs correctly on the full extent of their liability under the guarantee. It was alleged that the bank was negligent and in breach of its duty of care in that it failed to advise the trustees at all as to the extent of their liability under the guarantee.
[51] I have already referred to part of the relevant paragraph in Shivas in [39] above. I set out the whole of that paragraph at this point:24
A guarantor who is concerned at the circumstances in which he has given a bank guarantee will be able to complain should any of the following circumstances be present – deceit by the bank, misrepresentation, negligence if advice or information is sought and given or volunteered by the bank in a careless manner, breach of fiduciary duty in terms of Hamilton v Watson, unconscionable bargain, mistake and undue influence. The present question is whether it is necessary or desirable to add to the bases upon which a guarantor may, according to the circumstances, challenge the guarantee by casting upon the bank a positive duty to explain, warn or to recommend separate advice. In my respectful view a guarantor’s position is adequately covered in law already. If the guarantor cannot succeed on one or other of the recognised causes of action in my view the pendulum would be swinging too far if one were to permit an action for the tort of negligence on the premise not of advice negligently given but on the basis of a failure to explain, warn or recommend separate advice.
(Emphasis added)
[52] I cannot see how the circumstances of this case create effectively a new form of duty previously unrecognised. Mr Bradford had no authority to support his proposition. His reasoning is circular. It cannot be right that because the bank officers certified that they had explained the Guarantee, but did not explain (according to Mr Chapman), that in itself created a duty to explain. In my view, the duty must already exist separately from the certification.
[53] In this case, there is nothing unusual about the Guarantee or the underlying transaction between the Company and the Bank that would give rise to a duty to speak. Mr Chapman does not suggest that there was. This was simply a commercial transaction where Mr Chapman guaranteed the debt of a company of which he was the
24 Shivas v Bank of New Zealand, above n 4, at 368.
majority shareholder and sole director. Thus, the allegation of misrepresentation by silence must fail.
[54] As to negligence, there is no duty of care normally imposed on a bank to explain a guarantee. However, where a bank gives an explanation, it would be under a duty to ensure that the explanation was accurate.25 Here, Mr Chapman says that one of the issues at trial would be that the advice from the bank officers was careless/negligent in that those officers failed to give Mr Chapman any advice about the effect on the matrimonial home. But that submission assumes there was a duty to explain the Guarantee. The law is clear that there is not (absent the circumstances I have referred to).
[55] The third circumstance relied on is deceit. The tort of deceit requires a false representation of existing facts relied upon by the representee to his or her detriment.
[56] Mr Chapman says that deceit cannot be excluded given the absence of evidence from the Bank as to what was explained. He says that the issue of deceit by the Bank cannot be excluded at trial, that is deceit in the sense that the certificate untruthfully certified matters which were never explained.
[57] However, in order to find deceit, the Court must be satisfied that Mr Chapman relied on the claimed untrue certification certifying that certain matters were explained to him when entering into the Guarantee to his detriment. Either Mr Chapman signed the Guarantee with the certification already complete, at which point it is unclear why Mr Chapman would have relied on a certification that, by his own evidence, he would have known to be untrue. Alternatively, Mr Chapman signed the Guarantee and the certification was added later. In that case, Mr Chapman would not have known of the incorrect certification and therefore he could have placed no reliance on its existence.
[58]Therefore, the tort of deceit would not be available to Mr Chapman.
[59] Accordingly, it was unnecessary for the District Court Judge to determine whether the certification was provided or not. That is immaterial to the outcome.
25 Westpac Banking Corp v McCreanor [1990] 1 NZLR 580 (HC) at 584.
Judge Menzies was, therefore, correct to find that even if the bank officers did not provide the advice as certified, there is no arguable defence to the claim.
[60] Lastly, Mr Chapman submits that an estoppel arises because the Bank assumed the obligation to fully explain the nature and effect of the Guarantee, volunteered and purported to so explain, and purported to certify that the explanation fully explained the nature and effect of the Guarantee. He submits that because the Bank relied on the certification, presented it as a fact that was important to its case, and then resiled from that position when Mr Chapman disputed the certification, the Bank is now estopped from saying that the fact is not essential to its case.
[61] This submission is meritless. The Bank did not need to establish that the bank officers fully explained the nature and effect of the Guarantee to Mr Chapman to succeed in its claim. The necessary elements are set out in [24] above. They are not disputed by Mr Chapman.
Ground Three (the home)
[62] Mr Chapman submits that Judge Menzies was wrong to conclude that the fact that Mr Chapman signed the mortgage over the home 13 months after signing the Guarantee meant that the risk to the home arose after the mortgage document was signed, and that the bank officers would not have needed to explain an unidentifiable risk. Mr Chapman submits there was an identifiable risk to the home the moment the Guarantee was signed. This reinforces the alleged duty to warn. But he says this was not explained by the bank officers.
[63] I accept the submission made by Mr Chapman that the Judge was incorrect when he said that “the risk to the matrimonial home (if any) arose when the mortgage documents were signed after the guarantee”.26
[64] The Judge was incorrect because the mortgage secured personal borrowings by Mr Chapman, but that error does not take Mr Chapman anywhere.
26 Westpac New Zealand Ltd v Chapman, above n 1, at [30].
[65] The complaint Mr Chapman makes is premised on an assumption that he would have been told that when he signed the Guarantee his house was immediately at risk.
[66] That is not so. The District Court Judge was correct to hold that at the time the Guarantee was signed Mr Chapman’s matrimonial property was not subject to any identifiable risk. The Bank’s rights as a mortgagee only arose after the Guarantee was signed and in any event, the guaranteed debt was not linked to the mortgage.
[67] Mr Bradford submits that the ability of a judgment creditor to apply for a charging order over property under pt 19 of the District Court Rules 2014 demonstrates that the matrimonial property was at risk from the moment Mr Chapman executed the guarantee.
[68] I do not accept that submission. The ability of a judgment creditor to take enforcement steps (which could include a charging order over property) is not a risk that results from entry into a guarantee. It is a legal consequence of judgment, some steps removed from the actual entry into a guarantee.
[69] What Mr Chapman’s argument boils down to is that a banker must explain hypothetical scenarios that flow from a failure to meet the obligations under the guarantee following a demand. I accept Mr Upton’s submission that it cannot possibly be the case that, even if an explanation of the nature, effect and obligations of a guarantee is required (which is not the law), a banker must explain hypothetical indirect consequences of a default.
Conclusion
[70] The District Court Judge was correct to enter summary judgment. The appeal is dismissed.
Costs
[71] The parties addressed me on costs. They were agreed that costs should be on a 2B basis. I consider 2B is the appropriate categorisation. The Bank, as the successful party on the appeal, is entitled to costs. I would expect that costs can be agreed. I
would ask counsel to file a joint memorandum within 15 working days of the date of this judgment.
[72] Should there be any particular matters of disagreement, then the parties may file separate memoranda on those matters. In that case, the Bank should file and serve its memorandum within five working days after the date for the joint memorandum and Mr Chapman is to file and serve his memorandum within a further five working days thereafter. Memoranda should not exceed four pages.
Gordon J
2
3
0