FM Custodians Limited v Kooiman

[2017] NZHC 1783

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2017-485-343 [2017] NZHC 1783

BETWEEN

FM CUSTODIANS LIMITED

Plaintiff

AND

MICHAEL EDWIN KOOIMAN Defendant

Hearing:	24 July 2017
Counsel:	S D Munro and A L Davidson for Plaintiff j d Dallas for Defendant
Judgment:	31 July 2017

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      The  plaintiff  (FM)  applies  for  summary  judgment  against  the  defendant (Mr Kooiman), on a written guarantee signed by Mr Kooiman on 19 March 2013 (the Guarantee).

Background

[2]      On 19 March 2013, FM entered into a loan agreement (the loan agreement) with a company then called Ground Support (WGTN No. 1) Ltd.   This company later changed its name to Ribble Ltd, and it is now in receivership.  For convenience, I will refer to the company throughout this judgment as “Ribble”.

[3]      The loan agreement between FM and Ribble provided for a loan up to a maximum principal sum of $995,000.  The loan was to be repaid upon demand, and pending demand, by 14 March 2015.  The loan was to be secured by “All existing

and future Securities from [Ribble] and/or [Mr Kooiman] to [FM]”.

FM CUSTODIANS LIMITED v KOOIMAN [2017] NZHC 1783 [31 July 2017]

[4]      The loan agreement was secured by a mortgage registered on 22 March 2013 over a property owned by Ribble at Ribble Street, Island Bay, Wellington.  Ribble also entered into a general security agreement (the GSA), on 19 March 2013.  The GSA secured all advances made by FM to Ribble, including but not limited to the advance referred to in the loan agreement.

[5]      On 19 March 2013, Mr Kooiman, who is the sole director of Ribble, signed the Guarantee.

[6]      The Guarantee contained the following provisions:

2.1      Guarantee

The  Guarantor  unconditionally and  irrevocably guarantees to  the Lender the due payment by the Debtor of the Guaranteed Indebtedness and the due performance of and compliance by the Debtor with the Guaranteed Obligations.

2.2      Payment

The Guarantor undertakes that if, for any reason, the Debtor does not pay   when   due   (whether   by   acceleration   or   otherwise)   any Guaranteed  Indebtedness,  the  Guarantor  will  pay  the  relevant amount immediately on demand by the Lender.

2.3      Unenforceability of Obligations

As a separate and continuing undertaking the Guarantor unconditionally  and  irrevocably  undertakes  to  the  Lender  that, should the Guaranteed Indebtedness not be recoverable from the Guarantor under this Deed for any reason, including a provision of this Deed or an obligation (or purported obligation) of the Debtor to pay Guaranteed Indebtedness or to perform or comply with a Guaranteed Obligation being or becoming void, voidable, unenforceable or otherwise invalid, whether or not that reason is or was known to the Lender and whether or not that reason is:

a.    a defect in or lack of powers of the Debtor or the irregular exercise of those powers;

b.    a defect in or lack of authority by person purporting to act on behalf of the Debtor or the Guarantor; or

c.    a legal or other limitation (whether under the Limitation Act

1950 or otherwise), liability or incapacity of the Debtor or the
Guarantor; or

d.    the death, bankruptcy or insolvency of the Guarantor;

e.    a dissolution, amalgamation, change in status, constitution or control, reconstruction or  reorganisation or the death, bankruptcy or insolvency of the Debtor (or the commencement of steps to effect the same);

the Guarantor will, as a sole and independent obligation, pay to the Lender on demand the amount which the Lender would otherwise have been able to recover (on a full indemnity basis).  In this clause, the expressions “Guaranteed Indebtedness” and “Guaranteed Obligations” include any indebtedness or obligation which would have been included in those expressions but for anything referred to in this clause.

…

3.1      Liability as Sole Principal Debtor

As between the Guarantor and the Lender (but without effecting the obligations of the Debtor) the Guarantor is liable under this Deed as a sole and principal debtor and not as a surety.

…

3.3      Continuing Guarantee

The Guarantor’s obligations under this Deed:

…

b.    are in addition to, are not to be merged in and are without prejudice to, any security interest, guarantee, indemnity or other agreement, whenever in existence, in favour of any person, whether from the Guarantor or otherwise; and

c.    are to remain in full force and effect until the execution by the Lender of an unconditional discharge of the obligation of the Guarantor under this Deed pursuant to clause 3.4.

…

6.2      Payments to be Free and Clear

Each payment by the Guarantor to the Lender under this Deed is to be made:

a.    free of any restriction or condition; and

b.    free and clear of and (except to the extent required by law) without any deduction or withholding for or on account of tax or   on   any   other   account,   whether   by   way   of   set-off, counterclaim or otherwise.

…

SCHEDULE

SECURITY DOCUMENTS

The following are the Security Documents have been entered into by the

Guarantor in favour of the Lender pursuant to this Deed:

[Nothing listed]

[7]      The expressions “Guaranteed Indebtedness”, and “Guaranteed Obligations”,

and “Security Documents” were defined in the Guarantee as follows:

1.1      Definitions

In this Deed, unless the context otherwise requires:

“Guaranteed Indebtedness” means all indebtedness of the Debtor to the Lender or incurred by the Lender on behalf of the Debtor (including all interest, costs, taxes, stamp or similar duties or taxes, commissions, charges and expenses (including legal fees and expenses) incurred or sustained in any way by the Lender in connection with that indebtedness or the enforcement or attempted enforcement of that indebtedness);

“Guaranteed Obligations” means all obligations (whether present or future but other than obligations to pay money) of the Debtor to the Lender;

…

“Security Documents” means the deeds, charges and agreements set out in the Schedule and any other documents at any time executed, delivered or intended to secure the Guarantor’s obligations under this Deed (if details of any such agreements are included in  the Schedule).

[8]      In his first affidavit sworn in support of the summary judgment application, Mr Peter Hutchison says that Ribble failed to repay the loan on or before 14 March

2015, and the loan then expired.  He says that Ribble was consequently in default under the loan agreement, the mortgage and the GSA.

[9]      Mr Hutchison says that a letter of demand dated 20 July 2016 was served on Ribble on 26 July 2016.   The amount for which immediate repayment was then demanded was $697,107.37.  A copy of this letter of demand was also served on Mr Kooiman on 26 July 2016.   No payments were received from either Ribble or Mr Kooiman.

[10]     Mr Hutchison says that notices were then prepared under ss 119 and 122 of the Property Law Act 2007 (the PLA).  The s 119 notice was served on Ribble on

11 October 2016, and the ss 119 and 122 notices were served on Mr Kooiman on

18 October 2016.  Mr Hutchison says that neither Ribble nor Mr Kooiman complied with the notices.

[11]     Ribble was placed in receivership on 5 December 2016.  Mr Kevin Whitley was appointed receiver.

[12]     Mr Hutchison says in his first affidavit that the amount owing under the loan agreement as at 4 April 2017 was $873,232.62, made up as follows:

Principal drawdowns  $568,660.68

Interest charged from drawdown of

loan (at a daily rate of $262.89)  $211,810.94

Interest/Arrears payments since drawdown of

loan  -$  45,284.03

Collection costs from 31 May 2016 to

4 April 2017  $  11,021.16

Legal fees from 22 August 2016 to 4 April 2017      $  29,808.56

Receiver costs from 16 December 2016 to

4 April 2017  $  22,369.93

Rates from 16 December 2016 to 4 April 2017        $    1,235.34

Dishonour fees (12 @ $50.00)  $      600.00

Booking fees (26 @ $20.00)  $      520.00

FMC administration fee incurred on default             $     1,750.00

Penalty interest from 1 April 2016 to 4 April

2017 (at a daily rate of $219.07)  $  70,740.04

$873,232.62

[13]     Mr Hutchison deposed that interest and penalty interest continued to accrue after 4 April 2017 at a combined daily rate of $481.96.

Mr Kooiman’s notice of opposition

[14]     Mr Kooiman’s principal ground of opposition was that the Schedule to the Guarantee referred to no documents which Mr Kooiman had entered into in favour of  FM  “pursuant  to  [the  Guarantee]”.    There  were  no  documents  listed  in  the Schedule that had been guaranteed by Mr Kooiman.  In the absence of reference in the Schedule to the loan agreement and the security documents, the Guarantee could not be enforced against Mr Kooiman.

[15]     Mr Kooiman made a number of other allegations in his notice of opposition. He contended that Mr Whitley had been wrongly appointed receiver of Ribble, and that FM had  “converted [Mr Kooiman’s] control” of Ribble.    He also disputed various legal fees, collection costs, and receivership costs claimed by FM, on the basis that the GSA was not assented to by Ribble or Mr Kooiman, and was therefore not effective as against either Mr Kooiman or Ribble.  Mr Kooiman further alleged that FM’s “illegal conversion of [Mr Kooiman’s] control of [Ribble] and tortious interference” had damaged the business reputation of Mr Kooiman and caused him loss and damage.  He contended that the unlawful appointment of the receiver by FM had prevented him refinancing the debt claimed by FM.

[16]     Mr Kooiman further contended in his notice of opposition that an agent of FM told him that he was not concerned with Ribble not paying its mortgage payments, and was happy to continue on that basis.  Mr Kooiman contended that FM thereby incurred contributory liability with Mr Kooiman (should Mr Kooiman be found to have any liability to FM).

Grounds of opposition narrowed

[17]     In  his  written  submissions  dated  21  July  2017,  Mr  Dallas  advised  that Mr Kooiman had narrowed his opposition down to the ground that the Guarantee is unenforceable against Mr Kooiman.   Mr Dallas’ submissions acknowledged that Mr Kooiman had signed the Guarantee, but he submitted that certain omissions in

the Guarantee had the effect that the Guarantee did not create any liability for Mr Kooiman to FM.   In particular, without express inclusion in the Guarantee of reference to the loan agreement, Mr Kooiman had no liability to FM under the Guarantee.

[18]     Mr Dallas referred to cl 1.1 of the Guarantee, and the definition of “Security Documents”, submitting that the “deeds, charges and agreements” referred to in that definition were intended to be the documents set out in the Schedule (together with any other documents intended to secure Mr Kooiman’s obligations under the Guarantee).  He then submitted that, because there are no security documents listed in the Schedule to the Guarantee “it follows that [Mr Kooiman] has not entered into any Security Documents of [Ribble] in favour of [FM] pursuant to the Guarantee”.

[19]     Mr Dallas further submitted that the requirement of s 27 of the PLA that contracts  of  guarantee  must  be  in  writing  has  not  been  met  in  this  case.    He submitted  that  there  is  no  written  link  of  liability  tying  Mr  Kooiman  to  the obligations  in  Ribble’s  loan  agreement  with  FM.    The  intention  was  that  the Schedule was to contain reference to all of the security documents signed pursuant to the Guarantee; it was not intended to be limited to any additional security which might have been provided by Mr Kooiman to FM.  He contended on that basis that the Guarantee is incomplete and unenforceable.

The issues

[20]     There is just one issue to be determined, and that is whether the Guarantee, in failing to identify the documents creating the indebtedness between FM and Ribble, was so incomplete that it did not comply with s 27 of the PLA, or is otherwise unenforceable by FM.

Summary judgment applications – legal principles

[21]     Rule 12.2 of the High Court Rules materially provides:

12.2     Judgment when there is no defence

(1)      The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of

action in the statement of claim or to a  particular  part  of  any  such cause of action.

[22]     The proper approach to be taken to such applications was considered by the

Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:1

The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11

PRNZ 66 (CA).  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: Eng

Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[23]     In Bilbie Dymock Corp Ltd v Patel, the Court of Appeal said:2

… the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. In the end it can only be a matter of judgment on the particular facts.

Discussion and conclusions

[24]     Mr Munro submitted that the fact that the Schedule to the Guarantee does not list any security documents cannot provide Mr Kooiman with an arguable defence. The failure to list any documents in the Schedule merely reflected the fact that Mr Kooiman had not personally provided any additional security to FM to secure his obligations under the Guarantee.   Further, cl 3.3 of the Guarantee confirms that obligations in the Guarantee were to exist independently of any security (and were therefore not dependent on securities being specified in the Schedule).

[25]     Clause 3.3 of the Guarantee provides that the Guarantor’s obligations under

the Guarantee are additional to, and not to be merged in and are without prejudice to,

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].

2      Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA) at 85-86.

any  security  interest  guarantee,  indemnity  or  other  agreement,  whenever  in existence, in favour of any person, whether from the Guarantor or otherwise.

[26]     Mr Munro also submitted that s 27 of the PLA cannot provide Mr Kooiman with an arguable defence. That section provides:

27       Contracts of guarantee must be in writing

(1)       This section applies to contracts of guarantee coming into operation on or after 1 January 2008.

(2)      A contract of guarantee must be—

(a)      in writing; and

(b)      signed by the guarantor.

(3)       Subsection (2) does not require the consideration for a contract of guarantee to be in writing or to appear by necessary implication from a writing.

(4)       In this section, contract of guarantee means a contract under which a person agrees to answer to another person for the debt, default, or liability of a third person.

[27]     Section 27 clearly does not require a guarantee to specify securities provided in order for the guarantee to be valid, and Mr Munro submitted that the requirements of the section have been met in this case.

[28]     Mr Munro further submitted that FM was entitled to exercise its rights under the Guarantee independently of any other remedies it had.  Specifically, it was under no duty to seek recovery from Ribble directly, or realise its securities, before exercising its rights under the Guarantee.

[29]     I accept FM’s arguments on the interpretation of the Guarantee.

[30]     The starting point must be cls 2.1 and 2.2, together with the definition of the expression “Guaranteed Indebtedness” in cl 1.1 of the Guarantee.  These provisions are relatively conventional guarantee provisions, and they establish the primary, or fundamental, obligation undertaken by Mr Kooiman when he signed the Guarantee. Clause 3.1 makes it clear that Mr Kooiman’s liability is that of a principal debtor, and not as a surety.

[31]     Mr Dallas’ argument was that the Guarantee was not valid or binding on Mr Kooiman,  because  it  did  not  list  in  the  Schedule  the  loan  agreement,  the mortgage given by Ribble to FM, or the GSA.   I do not accept that submission. Certainly no documents are listed in the Schedule, but that is not surprising when one notes that the Guarantee itself did not require Mr Kooiman to enter into any “Security Document”.

[32]     The Schedule appears to be the only operative part of the Guarantee which refers to “Security Documents”, and if any documents should have been listed in the Schedule they would have to have been documents falling within the second part of the definition of “Security Documents” namely:

… any other   documents at any time executed, delivered or intended to secure the Guarantor’s obligations under this Deed (if details of any such agreements are included in the Schedule).

[33]     Reading the Schedule with this definition, I think it is quite clear that what was intended by the form of guarantee used was that if, and only if, the Guarantor was going to be required by the Guarantee itself to provide some security for the Guarantee, the nature of that “third party security” had to be stated in the Schedule, with relevant documents identified.

[34]     In this case, the Guarantee did not require Mr Kooiman to enter into any “Security Document” pursuant to this Deed.   The loan agreement, the mortgage given by Ribble, and the GSA were not “executed, delivered or intended” to secure Mr Kooiman’s obligations under the Guarantee, and in any event the very fact of their omission from the Schedule took them out of the definition of “Security Documents” in the Guarantee.3

[35]     I also accept Mr Munro’s submission that the Guarantee was intended to create stand-alone obligations on Mr Kooiman, separate and distinct from any obligations assumed under the loan agreement, the mortgage, or the GSA.  The loan agreement, for example, provided that Mr Kooiman would provide an unlimited

guarantee of Ribble’s  borrowing,  but  it  did  not  contain  any provision  requiring

3      Because the passage in brackets in the definition expressly excluded agreements the details of which were not included in the Schedule.

Mr Kooiman to give security for any liability he might incur under the Guarantee. The same is true of the GSA: while Mr Kooiman was named as the covenantor in the GSA, the document did not contain any obligation on him to provide security to FM for any liability he might incur under the Guarantee.

[36]     For those reasons, I do not accept Mr Dallas’ submission that the Guarantee was invalid or unenforceable against Mr Kooiman because it did not list in the Schedule the loan agreement, the mortgage, or the GSA.

[37]     Nor does s 27 of the PLA advance Mr Kooiman’s case.  The Guarantee is in writing, and it is signed by Mr Kooiman.  I accept Mr Munro’s submission that s 27 does  not  require  that  a  guarantee  specify  any  securities  the  lender  might  hold covering the guaranteed indebtedness.   Here the Guarantee was complete and sufficient for the purposes of s 27, without reference to the loan agreement, the mortgage, or the GSA.

[38]     For those reasons, I am satisfied that Mr Kooiman has not raised any arguable defence to the summary judgment application.

[39]     Mr Dallas has not challenged the quantum of FM’s claim as set out in its

statement  of  claim,  and  I accordingly enter  summary judgment  for  the  sum  of

$873,232.62 claimed in the statement of claim.

[40]     In addition to that sum, there will be judgment in favour of FM for interest calculated to the date of judgment, in the sum of $56,871.28 (being interest at the daily rate of $481.96 from 5 April 2017 to the date of judgment).

[41]     In a schedule of quantum handed up at the hearing Mr Munro set out at [1](b), (c), (d), (f), (g) and (h), claims for solicitor/client costs to 24 July 2017, receivership costs incurred by FM between 4 April 2017 and 24 July 2017, legal costs incurred by FM in relation to the receivership between 4 April and 24 July

2017, and increased collection costs incurred by FM under the loan agreement.  In case Mr Kooiman did not see these claims before the hearing, leave is reserved to him to file and serve a memorandum addressing FM’s claims in those paragraphs.

Any such memorandum is to be filed and served within 15 working days of the date of this judgment.  FM may file and serve a memorandum in reply within 10 working

days of its receipt of Mr Kooiman’s memorandum.

Associate Judge Smith

Solicitors:

Anderson Lloyd, Christchurch for Plaintiff jd Dallas, Wellington for Defendant