Federal Capital Limited v Simunovich

[2023] NZHC 1500

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1317

[2023] NZHC 1500

BETWEEN

FEDERAL CAPITAL LIMITED

Plaintiff/Respondent

AND

PETER JOHN SIMUNOVICH

Defendant/Applicant

Hearing:	13 March 2023
Counsel:	M Tingey for the Applicant/Defendant R Latton for the Respondent/Plaintiff
Judgment:	15 June 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

Solicitors/Counsel:

Pidgeon Judd, Auckland

Fee Langstone, Auckland

M Tingey, Barrister, Auckland R Latton, Barrister, Auckland

FEDERAL CAPITAL LIMITED v PETER JOHN SIMUNOVICH [2023] NZHC 1500 [15 June 2023]

Introduction

[1]        The defendant, Mr Peter Simunovich, seeks leave to appeal my judgment of 15 November 2022 declining his applications for summary judgment and/or strike out and for security for costs.1

[2]        The plaintiff, Federal Capital Limited (FCL), has brought these proceedings in respect of two loans it made in 2019 to Seafish Tasmania Pty Limited (Seafish). The loans total $450,000 and are both in default. FCL says that Mr Simunovich personally guaranteed Seafish’s obligations in respect of both loans. FCL seeks recovery under its guarantee.

[3]        Mr Simunovich submitted that summary judgment ought to be granted for his defence (or FCL’s claim ought to be struck out) because Mr Simunovich did not provide a written and signed guarantee in respect of either of the two loans as required by s 27(2) of the Property Law Act 2007 (PLA). Mr Simunovich said further that even if there were a guarantee, FCL did not have a right to enforce the guarantee without the consent of a third party which FCL did not have.

[4]        I held that it was reasonably arguable that  an  agreement  entered into  by  Mr Simunovich, FCL, and Seafish, referred to as the “Security Sharing Agreement” (SSA), included a contract of guarantee by Mr Simunovich to FCL. As it was in writing and was signed by Mr Simunovich it would comply with the requirements of s 27(2) of the PLA. However, I held that the full factual matrix needed to be understood before interpretating of the relevant provision. In addition, I held that it was reasonably arguable that FCL did have a right to enforce the guarantee without the consent of the third party and so I declined summary judgment and strike out.

[5]        Mr Tingey submits that in declining summary judgment I relied on extrinsic evidence that is inadmissible because s 27(2) of the PLA together with s 7(1)(a) and

(b) of the Evidence Act 2006 either make inadmissible or exclude such evidence.

1      Federal Capital Ltd v Simunovich [2022] NZHC 2985 [Judgment].

Mr Tingey continues that the approach I adopted is inconsistent with the decision of the Supreme Court in Brougham v Regan.2

[6]        In addition, Mr Tingey submits that there is insufficient evidence to support my finding that it is reasonably arguable that FCL may be able to enforce the guarantee on the basis that:

(a)FCL’s pleading did not  seek to enforce the relevant guarantee by    Mr Simunovich, the FE Investments Limited guarantee to Seafish (FEI Guarantee), and it only sought to recover the indebtedness of Seafish to FCL.

(b)The SSA does not create a guarantee in respect of Seafish’s debts to FCL by way of ‘sharing’ the FEI Guarantee. The FEI Guarantee only relates to Seafish’s debts to FEI, of which there is no assertion or evidence of indebtedness under.

(c)Clause 4.2 of the SSA only allows a lender to take action under the security documents in its favour. For FCL this would be FCL’s loan agreements, and not the FEI Guarantee (which was executed in favour of a separate lender, FEI).

[7]        A complicating factor is that since the judgment was issued FCL has amended its claim to add two alternative causes of action seeking specific performance of an alleged obligation by Mr Simunovich to provide a Deed of Guarantee and Indemnity on the basis that it was a condition subsequent in the FCL loan agreements. Summary judgment can only be granted to a defendant where a defendant has a defence to all causes of action. Mr Tingey submits that there is no basis for FLC to seek orders for specific performance and that it is an abuse of process to replead in this way. Alternatively leave ought to be granted to amend Mr Simunovich’s notice of appeal as the Court of Appeal could decide whether the new causes of action ought to stand.

2      Brougham v Regan [2020] NZSC 118, [2020] 1 NZLR 315.

[8]        Finally, leave is sought to appeal my decision declining Mr Simunovich’s application for security of costs. Mr Tingey submits that I did not take into account credible evidence of surrounding circumstances from which it may be reasonably inferred that FCL would be unable to pay a costs award.

[9]        The application for leave to appeal alleges errors of law, rather than fact, so I refer to my original decision for the factual background.3

[10]      I set out below the principles applying to leave to appeal before discussing the issues that arise.

Principles applying to leave to appeal

[11]      A party is required by s 56(3) of the Senior Courts Act 2016 to apply for leave to appeal any decision of the High Court made on an interlocutory application except for successful summary judgment or strike out applications. As the defendant’s applications for summary judgment and strike out were both declined, leave is required.

[12]      Most recent decisions on applications for leave to appeal rely on the following summary of principles set out by the Court of Appeal in Greendrake v District Court of New Zealand:4

[6]In Finewood Upholstery Ltd v Vaughan, to which Dunningham J referred in the leave decision, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made. The following considerations were recognised as relevant on an application for leave to appeal:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

3      Judgment, above n 1, at [19] – [50].

4      Greendrake v District Court of New Zealand [2020] NZCA 122 at [6] (footnotes omitted).

(d)the circumstances must warrant incurring further delay; and

(e)the ultimate question is whether the interests of justice are served by granting leave.

[7]This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council indicated that considerations similar to the principles applicable to applications under the former s 24G of the Judicature Act 1908, as explained in Meates v Taylor [Leave], apply to applications under s 56(5), stating:

We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.

[13]      These principles have since been confirmed by the Court of Appeal on many occasions including, most recently, in Sneesby v Southern Response Earthquake Services Ltd, Fugle v Vance and Ideal Investments Ltd v Earthquake Commission.5

[14]      Counsel for Mr Simunovich argues that in fact the summary set out in Greendrake does not accurately summarise the principles from Finewood Upholstery Ltd v Vaughan as was intended.6 In Mr Tingey’s submission, in Finewood Upholstery Fitzgerald J did not consider that there was a high threshold for leave to be granted. Instead, her Honour simply referred to the earlier decision, A v Minister of Internal Affairs,7 a case where Dobson J concluded leave was not required. Dobson J considered by way of obiter the principles applying to leave to appeal in any event, holding that even if there were a high threshold, leave would be allowed so it was not a determinative factor.

[15]      Mr Tingey submits that the high threshold test was therefore introduced without any analysis or reasoning and says there is no suggestion in the context or wording of s 56(3) of the Senior Courts Act that there is a high threshold before leave will be granted.

5      Sneesby v Southern Response Earthquake Services Ltd [2023] NZCA 206; Fugle v Vance [2023] NZCA 21; and Ideal Investments Ltd v Earthquake Commission [2022] NZCA 641.

6      Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679.

7      A v Minister of Internal Affairs [2017] NZHC 887.

[16]      Mr Tingey instead relies on Yu v Bradley, which is useful for its focus on the factors particularly relevant in the context of a summary judgment application which has been declined.8

[17]      In Yu  v Bradley, Moore J relied on Palmer J’s  summary of principles  in     Li v Chief Executive, Ministry of Business, Innovation and Employment.9 Palmer J held leave to appeal under s 56(3) is likely to be granted if:10

(a)the appeal is not likely to be overtaken by the substantive hearing or cannot otherwise be considered as effectively in the context of an appeal of the substantive decision; or

(b)the appellant is likely to be prejudiced by a postponement to the substantive appeal; or

(c)the appeal may be dispositive of the case in law or as a practical matter; and

(d)the arguments in the appeal are capable of bona fide and serious argument; and

(e)the issue on appeal concerns a decision of sufficient significance to the parties or a question of law or general principle of sufficient importance as to outweigh the cost and delay of the appeal.

[18]      Palmer J concluded that an application for leave is likely to be granted where, “more pithily”:11

(a)there is good reason to consider it before, or separately to, the substantive appeal; and

(b)it is sufficiently meritorious in substance and relates to a sufficiently important issue as to outweigh the cost and delay of appeal.

[19]      In Yu v Bradley Moore J held that in the ordinary course of applications for leave to appeal a summary judgment, the first limb of Palmer J’s short form test will always be satisfied because determination of the appeal may be dispositive of the case in law, and ordinarily postponement to the substantive appeal will be likely to prejudice the appellant.12

8      Yu v Bradley [2018] NZHC 2312.

9      At [9]–[11]; citing Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171.

10     Li v Chief Executive, Ministry of Business, Innovation and Employment, above n 9, at [21].

11 At [22].

12     Yu v Bradley, above n 8, at [17].

[20]      In my view the second limb of the short form test is a shorthand way of stating the considerations set out in Finewood Upholstery but without reference to a high threshold.

[21]      The requirement for a high threshold appears only likely to affect the decision to grant leave where the decision is marginal. I therefore consider the application in terms of the principles approved in Greendrake, other than the high threshold, and bearing the factors relied on in Li v Chief Executive, Ministry of Business, Innovation and Employment and Yu v Bradley in mind, and will come back to the question of whether a high threshold is required if the decision is marginal.

Issues

[22]The issues in respect of each application are therefore as follows:

(a)Is there an arguable error of law or fact?

(b)Is there general or public importance in the appeal or is it sufficiently important to the applicant to outweigh the lack of general or precedential value?

(c)Do the circumstances warrant incurring further delay?

(d)Are the interests of justice served by granting leave?

(e)Is there a high threshold before leave to appeal will be granted and if so, is it met?

Summary judgment and/or strike out

Is there an arguable error of law or fact?

[23]      Mr Tingey points to two alleged errors in respect of the summary judgment and strike out decision. The first is in relation to the reliance on extrinsic evidence and the second is the finding on the enforceability of the guarantee by the plaintiff.

Reliance on extrinsic evidence

[24]      Mr Tingey submits that I erred in considering extrinsic evidence to support a finding that it appeared to be reasonably arguable that there was a valid guarantee. He submits that this approach is inconsistent with the established principles in Brougham v Regan and the PLA as:

(a)the express terms of a contract of guarantee must be in writing in the signed document pursuant to s 27(2) of the PLA;13 and

(b)if the document signed by the person said to be guarantor does not include an agreement to answer for the debt, default or liability of a third person, then it is not a contract of guarantee.14

[25]      Mr Tingey then says that applying these principles, the existence of a valid guarantee must be determinable on the face of the documents, without the need to consider extrinsic evidence. He refers to my finding that none of the clauses themselves in the FCL loan agreements amount to an agreement by Mr Simunovich to answer to the debts of Seafish.15 As Mr Tingey says, I then considered the sole issue to be whether it was reasonably arguable that under the SSA Mr Simunovich agreed to be liable for Seafish’s debts to FCL.16

[26]      Mr Tingey accepts that the appropriate test in the context of a summary judgment application is whether the plaintiff’s claim discloses any “reasonably arguable” cause of action. However, he submits that the reasonably arguable test does not directly apply when determining the existence of a valid guarantee because this is limited to the written terms, and so the matter is one of law.  Mr Tingey continues that in the present case, the very existence of a contract of guarantee between FCL and Mr Simunovich is at issue as opposed to the meaning or scope of the guarantee, and that if there is a valid guarantee it should not be necessary to look beyond the face of the documents.

13     Brougham v Regan, above n 2, at [18].

14 At [35].

15     Judgment, above n 1, at [65].

16 At [66].

[27]      Mr Tingey refers to Colonial Bank of New Zealand v Lewis and Moffett for the proposition that extrinsic evidence may be adduced to ascertain the meaning of a guarantee, but not to alter its terms.17 He submits that, for example, extrinsic evidence could be considered for the purpose of clearing up an ambiguity in wording to determine the scope of the guarantor’s obligations. For this point, counsel refers to Quainoo v New Zealand Breweries Ltd where the Court of Appeal, in order to ascertain the meaning of the word “advances”, looked at surrounding factual circumstances to ascertain the intention of the parties.18 Mr Tingey, however, continues that either there is a valid guarantee in writing or there is not. If there is not, then the cause of action cannot be reasonably arguable. Extrinsic evidence cannot change the position or interpretation in this regard.

[28]      Mr Tingey goes on to say that, as was recognised in Brougham v Regan, the consumer protection purpose of s 27(2) of the PLA would not be met if a person who signs a document merely describing the signatory as guarantor, that otherwise contains no provisions of the purported guarantee, was found to be liable as guarantor.19     Mr Tingey says this is precisely the scenario between FCL and Mr Simunovich in respect of both the FCL loan agreements and the SSA, submitting:

(a)it is not disputed that the FCL loan agreements do not contain any guarantee or indemnity provisions; and

(b)the SSA does not include an agreement for Mr Simunovich to answer for the debt, default or liability of Seafish to FCL; while the SSA makes reference   to   a   “Deed   of    Guarantee    and    Indemnity    from Mr Simunovich” under a list of securities schedule, there is no corresponding provision under which Mr Simunovich, in his capacity as guarantor, agrees to extend his obligations under the FEI Guarantee to include answering for Seafish’s debts to FCL.

17     Colonial Bank of New Zealand v Lewis and Moffett (1887) 5 NZLR SC 465.

18     Quainoo v New Zealand Breweries Ltd [1991] 1 NZLR 161 (CA).

19     Brougham v Reagan, above n 2, at [38].

[29]      I agree that to satisfy the requirements of s 27 of the PLA, there needs to be an agreement in writing signed by Mr Simunovich that he will be answerable for Seafish’s debts to FCL. For the purposes of the summary judgment proceeding all that FCL needed to establish was that it was reasonably arguable that there was such a term.

[30]      I held that the FCL loan agreements themselves did not contain such terms.20 However, I concluded that it was reasonably arguable that clause 2.1 of the SSA could be interpreted as meaning that the FEI Guarantee was to be shared, providing a basis for saying that Mr Simunovich has agreed to answer for Seafish’s debts to FCL.21

[31]      After reaching this view, I referred to the timing of advances made under the FCL loans, the extrinsic evidence that Mr Tingey relies on, commenting that the timing supported the interpretation of the clause that the FEI Guarantee was to be shared.

[32]      Mr Tingey says that pursuant to s 27(2) of the PLA and s 7(1)(a) and (b) of the Evidence Act, any evidence not recorded in writing must be inadmissible for establishing the existence of a contract of guarantee although no authorities in support of this proposition were referred to.

[33]Section 7 of the Evidence Act states as follows:

7        Fundamental principle that relevant evidence admissible

(1)All relevant evidence is admissible in a proceeding except evidence that is—

(a)inadmissible under this Act or any other Act; or

(b)excluded under this Act or any other Act.

(2)Evidence that is not relevant is not admissible in a proceeding.

(3)Evidence is relevant in a proceeding if it has a tendency to prove or disprove anything that is of consequence to the determination of the proceeding.

[34]      Section 27(2) of the PLA states that a contract of guarantee must be in writing and signed by the guarantor. Section 27(4) defines a “contract of guarantee” as “a

20     Judgment, above n 1, at [65].

21     At [66]–[86].

contract under which a person agrees to answer to another person for the debt, default, or liability of a third person.” Section 27(2) therefore would exclude evidence of an oral contract under which a person agrees to answer for the debt. However, s 27(2) would not exclude evidence that would assist in interpreting a written contract to determine whether a person has agreed to answer to another person for the debt.

[35]      Although Mr Tingey considers that I erred by relying on the Supreme Court’s decision in Bathurst, this is exactly the point made in the passage relied on, where the Supreme Court said:22

… But it is well settled that the parol evidence rule does not govern the admissibility of extrinsic material in relation to contractual interpretation, as the interpretation of a contract does not involve any change to or overruling of the written terms.

[36]      Nor do I consider my decision is inconsistent with Brougham v  Regan  as  Mr Tingey submits.   In  Brougham v Regan  the loan agreement  was  signed by   Mr Brougham as guarantor but the agreement did not include any provision under which Mr Brougham agreed to answer to the trustees for the debt, default or liability of the company. This is the same as in respect of the FCL loan agreements in this case, Mr Simunovich signed as a guarantor but the agreements do not contain a contract of guarantee.23 However, here the parties also entered into another agreement, the security sharing agreement or SSA. After considering the terms of that agreement I held that it was reasonably arguable that it contained a provision (clause 2.1) under which Mr Simunovich agreed to answer for the debt, default or liability of Seafish. The SSA is in writing and is signed by Mr Simunovich as both director of Seafish and as guarantor. I therefore held that it was reasonably arguable that there was a written contract of guarantee and so declined to grant summary judgment.

[37]      Mr Tingey refers to [36] and [37] of Brougham v Regan where the Supreme Court refers to “the inferring of guarantee terms” in  the  earlier  decision  of  Bradley West Solicitors Nominee Co Ltd v Keeman.24 The Supreme Court questioned

22     Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [56] (footnote omitted).

23     Judgment, above n 1, at [65].

24     Brougham v Regan, above n 2, at [37] referring to Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC).

whether Bradley West remains good law as it was decided before s 27(2) of the PLA came into force, which the Supreme Court referred to as a “more exacting requirement” than the previous provision.25

[38]      However this is not a situation where I held that it was reasonably arguable that guarantee terms could be inferred from the extrinsic evidence or otherwise. Instead any reliance on extrinsic evidence was only for the purpose of interpreting written terms that I had held arguably amounted to a contract of guarantee as required by     s 27(2).

[39]I do not consider that I erred in relying on extrinsic evidence in this way.

Enforceability of the FEI Guarantee

[40]      Even if it is reasonably arguable that the SSA contains a contract of guarantee, Mr Tingey submits on behalf of Mr Simunovich that there is insufficient evidence to support the finding that it is reasonably arguable that FCL may be able to enforce the FEI Guarantee.

[41]      Mr Tingey submits firstly that FCL’s pleading did not seek to enforce the FEI Guarantee and it only sought to recover the indebtedness of Seafish to FCL.

[42]      I accept that the original pleadings may not have sought to enforce the FEI Guarantee, but the current statement of claim does, defining “the Guarantee” as “a deed of guarantee from Mr Simunovich in favour of FEI guaranteeing the indebtedness of Seafish”. The pleading now seeks to enforce the FEI Guarantee when it pleads at paragraph 28 that Mr Simunovich agreed to guarantee Seafish’s obligations including by virtue of “the Guarantee”. Mr Simunovich denies the pleading in his statement of defence, relying on the terms of the SSA in full, including that there is no clause in the SSA or otherwise which provides that Mr Simunovich guarantees the debts of Seafish to FCL and that FCL has no power to enforce the FEI Guarantee in its own name. As I held in the original judgment, these are issues requiring determination at a full trial.

25     Brougham v Reagan, above n 2, at [35].

[43]      Secondly, Mr Tingey says the SSA does not create a guarantee in respect of Seafish’s debts to FCL by way of ‘sharing’ the FEI Guarantee. This argument relies on a finding that the SSA agreement did not contain a contract of guarantee. If it is held that the SSA does contain a contract of guarantee, which I have found is reasonably arguable, then this argument does not assist in explaining why the FEI Guarantee would not be enforceable.

[44]      Thirdly, Mr Tingey submits that clause 4.2 of the SSA only allows a lender to take action under the security documents in its favour, submitting that for FCL this would be FCL’s loan agreements, and not the FEI Guarantee (which was executed in favour of a separate lender). In the judgment however, I held that there is a reasonable argument that the correct interpretation of clause 2.1 of the SSA was that the FEI Guarantee is to be shared with FCL.26 Mr Tingey does not refer to this finding in his submissions. In my view, if it is reasonably arguable that clause 2.1 means that the FEI Guarantee is to be shared with FCL, then clause 4.2 would allow FCL to take action under the FEI Guarantee. Again, this does not advance Mr Simunovich’s position.

[45]      Mr Latton for FCL noted in his submissions that Mr Simunovich’s submissions ignore the findings in the judgment on the exercise of SPH Quota Limited’s (SPH) contractual discretion, and Mr Simunovich’s part in them. Mr Latton submits that the fact that this was not touched on by Mr Tingey highlights the lack of merit in this aspect of Mr Simunovich’s appeal and that the appeal is not capable of bona fide and serious argument. I agree that this is another hurdle for Mr Simunovich to overcome to establish there was an error.

[46]      I do not therefore accept that I erred in reaching the conclusion however that it was reasonably arguable that FCL could enforce the FEI Guarantee.

[47]      In case I am wrong in these conclusions I go on to consider the remaining Greendrake factors in respect of an appeal of the summary judgment and/or strike out decision.

26      Judgment, above n 1, at [77].

Is there general or public importance in the appeal or is it sufficiently important to the applicant to outweigh the lack of general or precedential value?

[48]      The question of whether s 27(2) of the PLA makes inadmissible or excludes oral evidence in terms of s 7(1)(a) or (b) of the Evidence Act is not a question that appears to be have been addressed before. However, the Court of Appeal is unlikely to be attracted to determining this point where the extrinsic evidence was not determinative, but was rather referred to in support, and the appeal is from a decision to decline a summary judgment/ strike out application rather than following a full hearing.

[49]      Any importance to Mr Simunovich would be complicated by the amendments to the statement of claim because even if he succeeds on appeal, two causes of action would remain, unless summary judgment could be entered in Mr Simunovich’s favour or those causes of action could be struck out. Rule 12.2(2) of the High Court Rules 2016 only allows the court to give summary 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.

[50]      No strike out or summary judgment applications have been filed in respect of the two new alternative causes of action. Mr Latton for FCL explains that the amendments were made as a result of the reference in the judgment to the possibility of seeking specific performance of Mr Simunovich’s obligation to sign a Deed of Guarantee and Indemnity in respect of the FCL loans.27

[51]      Clause 3 of the FCL loan agreements provides that FCL is not required to advance the loans unless the conditions outlined, referred to as “General Conditions Precedent”, have been satisfied. Clause 17.7 of the FCL loan agreements then records that FCL may in its absolute discretion make an advance to Seafish notwithstanding that not all of the conditions precedent have been satisfied. One of the conditions precedent is that Seafish would provide to FCL duly executed copies of the “Transaction Documents” which are defined to include the “Security Documents”. The “Security Documents” are listed in the first schedule and include a “Deed of

27      Judgment, above n 1, at [64].

Guarantee and Indemnity from Peter John Simunovich in favour of the Lender guaranteeing the indebtedness of Seafish Tasmania Pty Ltd”.

[52]      It was submitted on behalf of Mr Simunovich that this condition precedent must have been waived. FCL however disagreed with that proposition and said that the SSA was arranged instead. In the judgment after recording this factual dispute, I referred to clause 17.7 of the FCL loan agreements which provides:28

The Lender may, in its absolute discretion, make an Advance made to the Borrower notwithstanding that not all of the conditions precedent to that Advance have been satisfied. In any such event, no such conditions precedent shall be considered to have been waived except as expressly waived in writing by the Lender, and unless expressly so waived, performance of any such condition shall remain a condition subsequent to the Lender’s making of that Advance.

[53]      I noted in the judgment that this continuing obligation, may provide a basis for seeking specific performance of Mr Simunovich’s obligation to sign a Deed of Guarantee and Indemnity in respect of the FCL loans if the SSA did not provide appropriate security.29

[54]      Mr Tingey submits that there is no basis to seek orders for specific performance because:

(a)there was no covenant or commitment by Mr Simunovich in either of the FCL loan agreements or otherwise to sign a Deed of Guarantee and Indemnity;

(b)any obligation to sign a guarantee was a nullity due to the FCL loans not meeting the requirements and/or policy of s 27 of the PLA; and

(c)the obligation to sign the guarantee is too uncertain to be enforced as the terms of the guarantee are not specified in the FCL loan agreements or anywhere else.

28     Judgment, above n 1, at [62] – [64].

29 At [64].

[55]      In respect of the first ground that there was  no  covenant  or commitment,  Mr Tingey refers to Brougham v Regan, noting that there was difficulty with the same argument in that case due to the absence of any covenant in the loan agreement that could be enforced by way of specific performance. As noted in my judgment however, entry into a guarantee appeared to have been a simple condition precedent in Brougham v Regan.30 The Supreme Court recorded that the respondents in that case decided to waive that requirement and therefore there was no remaining commitment made by Mr Brougham in respect of which an order for specific performance could be made.31 In this case however it has not yet been determined whether FCL did waive this requirement; FCL is disputing that this is the case. Furthermore, the FCL loan agreements required any such waiver to be in writing and there was no such evidence before me.

[56]      There may be an argument that the obligation to provide the executed Deed of Guarantee and Indemnity is an obligation on Seafish rather than Mr Simunovich but, like the question of waiver, this is not a matter that could be determined in the context of this summary judgment application even if leave were to be granted for the notice of appeal to be amended to include these new causes of action (if that were possible).

[57]       In respect of Mr Tingey’s second ground, whether the FCL loans themselves met the requirements of s 27 of the PLA appears irrelevant to whether there was an obligation on Mr Simunovich to sign a guarantee. These are two separate questions. If there was an obligation to sign a guarantee that could be specifically enforced then it would meet the requirements of s 27 of the PLA so no policy issue would arise.

[58]      Finally, Mr Tingey submits that the obligation to sign the guarantee is too uncertain to be enforced as the terms of the guarantee are not specified in the FCL loan agreements. However, the “Security Documents” are listed in the first schedule and are described as including a “Deed of Guarantee and Indemnity from Peter John Simunovich in favour of the Lender guaranteeing the indebtedness of Seafish Tasmania Pty Limited.” It is at least reasonably arguable that these terms are sufficiently certain.

30     Judgment, above n 1 at [65].

31 At [65].

[59]      Given these additional causes of action, in my view, any appeal could not be said to be sufficiently important to Mr Simunovich to outweigh the lack of any general or precedential value as it would be unlikely to be dispositive in any event.

Do the circumstances warrant incurring further delay?

[60]      The Court of Appeal would likely be in the same position as I was, in that it would require context before interpreting the SSA. In my view therefore, even if I have erred in law or fact, it would be preferable for those issues to be determined after a full hearing and in the context of discovery having been completed.

[61]      These proceedings were first filed in 2020 and discovery has not yet been undertaken. Counsel for Mr Simunovich submits that any delay has been of the plaintiffs doing, pointing to the fact that there have been four iterations of the statement of claim. However some of the delays have arisen as a result of Brougham v Regan being delivered after the proceedings were filed and it appears that during some periods there have been attempts at settlement.32

[62]      I do not consider that the circumstances warrant incurring further delay. A critical factor is that the arguments being raised by Mr Simunovich are arguments that can be raised in the full hearing, and on appeal following the full hearing, if not successful.

Are the interests of justice served by granting leave?

[63]      It will be clear from the above that I do not consider that the interests of justice would be served by granting leave.

Is there a higher threshold before leave to appeal will be granted, and if so, is it met?

[64]      It is unnecessary to consider this question because the other factors relevant to whether leave to appeal ought to be granted do not favour leave and so, whether there is a high threshold or not, leave would not be granted.

32     Brougham v Regan, above n 2.

Security for costs

Is there an arguable error of law or fact?

[65]      Mr Simunovich submits that I erred in declining security for costs by not taking into account credible evidence of surrounding circumstances from which it may reasonably be inferred that FCL would be unable to pay a costs award.

[66]      Mr Tingey says that this evidence included the fact that FCL was acting as a trustee in advancing and receiving the loans and therefore there is no evidence of its own assets. However, I dealt explicitly with this evidence in the judgment, recording that Mr Tingey had emphasised that FCL was acting as a trustee but holding that there was no evidence that this was always the way in which FCL operated and that       Mr Stewart’s undisputed evidence was that the company was financially stable and able to pay any future costs award made in the proceeding.33 No evidence bringing this financial ability into question had been filed.

[67]      Mr Tingey then submits  that  I  did  not  take  into  account  the  fact  that  Mr Simunovich had no ability to access any information about the financial position of FCL.

[68]      Rule 5.45 of the High Court Rules requires a judge, before ordering security for costs, to be satisfied that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful.34 The primary evidence relied on by Mr Simunovich was that a costs award in his favour was not paid for a period of approximately five weeks. In the judgment I went through the circumstances surrounding this delay and held that the slight delay in paying the costs award was not sufficient to satisfy the threshold of impecuniosity.35 Moreover, I held that the fact that the costs award was paid, even if slightly late, in fact supports the point that the plaintiff has sufficient funds.

33     Judgment, above n 1, at [110].

34     High Court Rules 2016, r 5.45(1)(b).

35     Judgment, above n 1, at [109].

[69]      I did not consider therefore that the threshold for security for costs had been met nor do I consider that I erred in this approach. It is not a matter of not having taken into account credible evidence of surrounding circumstances. It is instead that after taking those matters into account, I did not consider the threshold was met.

[70]      I do not consider that I erred in holding that the threshold for security for costs was not met.

Is there general public importance in the appeal or is it sufficiently important to the applicant to outweigh the lack of general or precedential value?

[71]      Unlike the defendant’s application for summary judgment or strike out, the security for costs application will not be able to be run in the full hearing or on appeal from the full hearing, so the value to Mr Simunovich of the appeal of this application might in this case outweigh the lack of general or precedential value.

Do the circumstances warrant incurring further delay?

[72]      Mr Simunovich failed at the first threshold on his security for costs application. I did not therefore go on to consider the merits of FCL’s claim or whether any impecuniosity of FCL might be attributable to Mr Simunovich’s actions. If, however, FCL succeeds in establishing that the SSA contains a contract of guarantee or that Mr Simunovich is required to provide an executed Deed of Guarantee and Indemnity then any impecuniosity that FCL might have  may  have  been  contributed  to  by Mr Simunovich through not honouring this guarantee. In those circumstances it is unlikely that even if I erred on the threshold question that security for costs would be ordered. The circumstances do not therefore appear to warrant incurring further delay. This is particularly the case here where the proceedings were first filed in 2020.

Are the interests of justice served by granting leave?

[73]      An appeal of the security for costs decision would be likely to delay resolution of the case for a significant time, including delaying discovery and any further settlement discussions. In the circumstances, where I am not granting leave to appear the summary judgment/strikeout decision, I do not consider it is in the interests of justice to grant leave in respect of the security for costs decision.

Is there a higher threshold before leave to appeal will be granted, and if so is it met?

[74]      Only the second factor supports granting leave, and the other factors clearly outweigh that factor. Leave ought not to be granted, again, whether there is a high threshold or not.

Result

[75]      The applications for leave to appeal both the summary judgment/strike out application and the security for costs application are declined.

Costs

[76]      FCL has succeeded and so is entitled to costs. I ask the parties to confer and only if costs cannot be agreed to file memoranda, on behalf of the plaintiff within 25 working days of this judgment and the defendant within 35 working days.

Associate Judge Sussock