Jacomb v Wikeley HC Wellington CIV 2010-485-997

[2010] NZHC 1974

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-997

BETWEEN  MICHAEL JOHN JACOMB

TRENA KATHLEEN JACOMB AND PETER REGINALD RICHARDSON Plaintiffs

AND  KENNETH DAVID WIKELEY

ALSO CALLING HIMSELF KENNETH DAVID WIKLEY

Defendants

Hearing:         20 October 2010

Counsel:         G J Toebes for Plaintiffs

M Lenihan for Defendant

Judgment:      1 November 2010

JUDGMENT OF CLIFFORD J

Introduction

[1]      The plaintiffs, in their capacities as trustees of the Genset Trust (as such “the Trust”), apply for summary judgment against the defendant Mr Wikeley, aka Wikley (“Mr Wikeley”) in the amount of US$275,933 (“the Alleged Debt”).  The Trust says Mr Wikeley now owes the Alleged Debt to it pursuant to a guarantee dated 28 April

2009 (“the Guarantee”) given by Mr Wikeley in favour of the Trust with respect to

50% of monies advanced by the Trust to a company, described in the guarantee as

Edel Metals Ltd (NZ).

JACOMB AND ANOR V WIKELEY AND ANOR HC WN CIV-2010-485-997  1 November 2010

Background

[2]      The essential facts, as pleaded by the Trust, are that:

a)       the Trust made four separate loans totalling US$1,560,000 to Edel Metals Group Ltd, a duly incorporated company having its registered office at Auckland (“the Borrower”).  Those four separate loans were advanced as follows:

i)        US$500,060, advanced on 15 December 2008; ii)           US$500,000, advanced on 11 February 2009; iii)           US$200,000, advanced on 8 May 2009; and

iv)      US$300,000, advanced on 27 May 2009.

b)Each separate loan was to be repaid at the expiry of the 18 month period following the date of its advance, and interest was payable on the outstanding amount of each loan at the rate of 10% accruing until and payable upon the repayment of the principle.

c)       In   the   Guarantee   Mr   Wikeley   covenanted   that   he   personally guaranteed and agreed to be personally liable for repayment of 50% of the total outstanding loans plus accrued interest owing to the Trust by the Borrower at the end of each 18 month loan period.

d)The first loan of US$500,060 with accrued interest of US$50,006 (a total of US$500,066) was not paid on the due date of 15 May 2010. The Trust has made demand under the Guarantee on Mr Wikeley for the  payment  of  that  sum  but  Mr  Wikeley  has  failed  to  pay. Mr Wikeley is therefore liable to the Trust as at 15 May 2010 in the sum of US$275,033 (being 50% of the amount outstanding on that date).

[3]      Mr Wikeley does not deny that he made the Guarantee in favour of the Trust. Rather, Mr Wikeley denies liability under the Guarantee on the basis that:

a)       the company said by the Trust to be the Borrower, Edel Metals Group Ltd, is not the debtor named in the Guarantee.   Rather the debtor named in the Guarantee is a non-existent identity, Edel Metals Ltd (NZ); and

b)the monies loaned (Mr Wikeley does not appear to deny that the Trust lent monies in relationship to a business venture in Chile with which he and the Trust are associated), were not lent to the Borrower, but to other entities.

[4]      Therefore, and in terms of the usual principles applying to applications for summary judgment, there are material conflicts of evidence on crucial matters that can only be resolved at a hearing.

[5]      Furthermore, Mr Wikeley submits that no consideration was given for the Guarantee and that, looked at objectively, the parties did not intend to create legal relations and/or the guarantee fails for uncertainty.

[6]      On that basis, Mr Wikeley says that the Trust’s application for summary judgment should not be granted.

[7]      In addition to those matters, raised by Mr Wikeley in his notice of opposition, a further matter arose at the hearing, which Mr Toebes for the Trust responsibly accepted needed to be addressed.  This is, assuming that the Guarantee is enforceable against Mr Wikeley for the recovery of monies advanced by the Trust to the Borrower, whether – by reference to the terms of the Guarantee – those monies are yet payable.   As matters transpired, there were in fact three guarantee documents signed by Mr Wikeley.  At least one interpretation of the effect of those documents is that it is the last of them which currently provides Mr Wikeley’s guarantee, and that Mr Wikeley will not be liable on that guarantee until the Loan has become repayable in full or, expressed alternatively by reference to what Mr Toebes refer to as the four

tranches of the loan, the final tranche has become repayable.  As a matter of fact, that will not occur until 27 November this year.

Summary judgment – relevant legal principles

[8]      As Mr Lenihan, counsel for the defendant, helpfully outlined in his written submissions, the principles applicable to summary judgment applications are well known and were recently restated by the Court of Appeal in Krukziener v Hanover Finance Ltd [2010] NZAR 307 at paragraph [26]:

[26]      The  principles  are  well  settled.     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).

[9]      I approach the Trust’s application on that basis.

Discussion

[10]     I propose first to discuss the “further matter” that arose at hearing.  As will become apparent, in my view that matter is dispositive of this application, and means that summary judgment is not now appropriate.   Beyond that, and although – as I think I made it clear at the hearing – I think Mr Wikeley faces a considerable head wind, I do not propose to comment further in detail as there will inevitably need to be a further application for summary judgment, and that application will need to be addressed on its merits at the time.

[11]     In order to explain my conclusion, some further background is appropriate.

[12]     As  deposed  by  Mr  Wikeley  in  his  affidavit  in  opposition,  he  is  a businessman, specialising in carrying out ventures and projects that look to be good opportunities and which could ultimately be listed on either in New Zealand or Australian stock exchange.  In 2008 he learned of a mining opportunity in Chile.  He contacted his old friend, Mike Jacomb (one of the Trustees).  He introduced the Trust to that business opportunity.   Mr Wikeley instructed his accountant Mr Gibson to incorporate a company in New Zealand named Edel Metals Group Ltd that would act as the holding company for the Chilean venture.   Edel Metals Group Ltd was incorporated for that purpose.   The shareholders in Edel Metals Group Ltd were Geier Ltd, a Trust company representing Mr Wikeley and his associates’ interests, and the Trust.  Mr Wikeley, and on behalf of the trust, Mr Jacomb agreed to use an existing company in Chile for the purposes of the venture, Orion Minerals Group SA.

[13]     Mr Wikeley’s argument is that the Trust did not make loans to Edel Metals

Group Ltd, but to a Chilean entity Orion Minerals Group SA.

[14]     Mr Jacomb, in affidavits filed at the time of the application, and then in reply, gave evidence that loans were advanced by the Trust to the New Zealand borrower, by funds being credited to various South American bank accounts at the direction of Mr Wikeley, or persons associated with the venture in Chile.  Mr Toebes, with some force in my view, pointed to director and shareholder resolutions of Edel Metals Group Ltd that acknowledge its liability for the monies that had been so advanced.

[15]     Be that as it may, the terms of the Guarantee, which Mr Wikeley admits granting in favour of the Trust, are as follows:

I, Kenneth David Wikeley, (Passport number EA136700) hereby agree to increase  the  Personal  Guarantee  (PG)  given  the  Genset Trust  and  Mike Jacomb, by USD100,000.

The  PG  shall  cover  50%  of  the  total  loan  from  Genset  Trust  for USD1.2 million (one million two hundred thousand dollars) to Edel Metals Limited (NZ), which is for an 18 month period.   At the end of the Loan period for the USD1.2 million (one million two hundred thousand dollars) plus interest, if there is any outstanding loan left, Kenneth David Wikeley is personally  liable  for  50%  of  the  outstanding  debt  plus  the  outstanding interest at the expiry of the 18 (eighteen) month loan period.

[16]     The Guarantee which Mr Wikeley accepted he had signed and sent by fax to the Trust, was, in fact, the second such guarantee that Mr Wikeley had issued in favour of the trust.

[17]     Mr Wikeley first signed such a document on 11 February 2009, referring to a loan of US$1,000,000.  He subsequently issued another such document on 22 May

2009 which referred to the full amount of US$1,500,000 ultimately advanced by the

Trust.

[18]     The origin of those guarantee documents is best explained in a series of emails appended by Mr Jacomb to his affidavit in support, the genuineness of which were not challenged by Mr Wikeley.

[19]     On  5 February,  Mr  Wikeley  emailed  a  Judith  Burson,  who  works  for

Mr Gibson’s accountancy firm, and Mr Jacomb in the following terms:

Dear Judith,

Can you draw up an agreement please for Mike, and get Don to sign it as my power of attorney.  Get some input from Mike, send both of us the draft.

MAIN IDEA

Mike Jacomb through the Genset trust (get name right and address etc) has loaned USD1 million to Edel Metals Ltd (quote right name and company details).

Kenneth  David  Wikeley  (Auckland)  hereby  agrees  that  he  is  personally liable for USD500,000 of this debt, in the event that the debt was not repaid to the Genset Trust as per the loan agreement to Edel Metals Limited.   It needs to be recognised that Genset trust has so far paid USD500,000 of the loan, and will be completing the final payment of USD500,000 within the next seven days, at which time the personal guarantee will be fully in effect.

Something like this, but Mike may have some other words to add. Regards

Ken

[20]     After some discussion between Mr Jacomb and Mr Wikeley as to the terms of the guarantee, on 11 February Mr Wikeley sent to Mr Jacomb, copied to Ms Burson, the following email:

I really don’t see why we need a lawyer Judith.  I am not asking you to draw it up, I just told you what to write and Don signs it.   We did the other documents before with the simple letters between us.  Its very simple.

“I, Kenneth David Wikeley agree to be personally liable for 50% of the 18 month USD1 loan from Genset Trust to Edel Metals Limited.  Ken Wikeley also acknowledges that he is personal liable for the 50% of the interest on the loan.”

That’s it.

[21]     Then, that same day, and in my view uncontrovertibly as a result of that exchange of emails, Mr Gibson as Mr Wikeley’s attorney signed a guarantee as below:

I, Kenneth David Wikeley, (Passport number EA136700) hereby agree to give the Genset Trust and Mike Jacomb, a Personal Guarantee (PG).

The PG shall cover 50% of the total loan from Genset Trust for USD1 (one) million dollars to Edel Metals Limited (NZ), which is for an 18 month period.  At the end of the Loan period for the USD1 (one) million dollars plus interest of 10% (per annum), if there is any still outstanding loan left, Kenneth David Wikeley is personally liable for 50% of the outstanding debt plus the outstanding interest at the expiry of the 18 (eighteen) month loan period.

I acknowledge receipt of the first payment of US$500,000 on 17 December

2008.

[22]     What is to my mind quite clear, thus far, is that the guarantee of 11 February

2009 was signed at a point in time when Mr Jacomb, having already advanced on behalf of the Trust US$500,000, was to advance a further US$500,000.   The Guarantee, signed on 28 April and sued under, covered an advance by the trust of a further US$200,000.  In its own terms, the Guarantee is best understood as referring back  to,  and  increasing  Mr  Wikeley’s  liability  under,  the  first  Guarantee  of

11 February.   I note – in passing – that that would appear to deal with the “past consideration” point.

[23]     Moreover, Mr Wikeley personally acknowledged the receipt by the named Borrower (Edel Metals Ltd (NZ)) “of the first payment of USD500,000”.  Again, I note in passing, that that would appear to deal reasonably adequately with the issue Mr Wikeley raised as to the identity of the Borrower named in the Guarantee.

[24]     Again, be that as it may, the text messages then show the Guarantee being issued, effectively to cover the further advance of USD200,000 made by the Trust, as pleaded, on 8 May 2009.

[25]     Finally,  a  third  guarantee  document  was,  in  very  similar  circumstances, provided by Mr Wikeley, again signed under Mr Gibson’s power of attorney which read in all material terms identical to that of the guarantee itself, but – as set out below – “increased” to USD1.5 million.  On 20 May 2009 Mr Wikeley instructed Ms Burson in the following terms:

Dear Judith

The following has been agreed with Mike Jacomb.

Mike  will  advance  a  further  USD300,000  loan  to  Edel  Metals  the  NZ

company.

Please do the following, the same as you did for the last recent USD200,000 a couple of weeks ago:

1)   Increase the Loan documents by a further USD300,000 plus interest

2)   Get another Letter for me to sign an additional personal guarantee for my share same as before

3)   I have agreed to give MIKE a further two (2) million shares in Orion

Minerals Group (OMG) for FREE.

Please add these to the trust agreement letter you have for Mike.  Thus the sixteen million shares in OMG he has now becomes eighteen (18) million shares.

And any normal things you did the same as last time with Directors resolutions for the money etc, etc.  Lets get his all signed up and done over the next couple of days.  You can email me the personal guarantee like last time, or Don can sign it as my POA.

Regards

Ken Wikeley

[26]     On 22 May Mr Gibson, as Mr Wikeley’s attorney, signed the  following document:

22 May 2009

Mr M Jacomb

As Trustee of the Genset Trust

By Email & Facsimile

I, Kenneth David Wikeley, (Passport number EA136700) hereby agree to increase  the  Personal  Guarantee  (PG)  given  the  Genset Trust  and  Mike Jacomb, by USD150,000.

The  PG  shall  cover  50%  of  the  total  loan  from  Genset  Trust  for USD1.5 million (one million Five hundred thousand dollars) to Edel Metals Limited (NZ), which is for an 18 month period.   At the end of the Loan period for the USD1.5 million (one million five hundred thousand dollars) plus interest, if there is any outstanding loan left, Kenneth David Wikeley is personally  liable  for  50%  of  the  outstanding  debt  plus  the  outstanding interest at the expiry of the 18 (eighteen) month loan period.

Signed for and on behalf of

Kenneth David Wikeley

D. M Gibson

Under the power of attorney granted by

Kenneth David Wikeley

[27]     Again, that third Guarantee document effectively increases Mr Wikeley’s liability  to  the  Trust,  and  does  so  by  reference  to  “the  total  Loan  ...  for USD1.5 million ... which is for an 18 month period”.

[28]     In  these  circumstances  the  obvious  question  is  whether  there  is  yet  any monies due and owing by Mr Wikeley under “the Guarantee” to the Trust.

[29]     In this, it is necessary to have regard to the sequential nature of the each of the guarantees.  Each guarantee, on its face, guarantees the full principle amount of what is described as the “Loan” and not what Mr Toebes referred to, and which were pleaded as, individual tranches.  In particular, I note that the final guarantee speaks of the total loan from Genset Trust for USD1.5 million, which is “for an 18 month period”.

[30]     Although the documentation is not especially clear on this point, in my view the proper interpretation, and at least an arguable one in terms of summary judgment,

is that each guarantee in the series effectively replaced the earlier one.   After all, there is no doubt that Mr Wikeley is not separately liable on each guarantee for the principle amount referred to.

[31]     Therefore, in my view, the credible argument – which stands in the way of summary  judgment  at  this  point  –  is  that  until  the  last  repayment  date  falls, Mr Wikeley has no liability.

[32]     On that basis, summary judgment is declined.

[33]     As this was not an argument raised by Mr Wikeley, but rather by the Court, I

think this is an appropriate situation where I should reserve costs.  I do so.  If not resolved, the parties may file brief submissions.

Solicitors:           JTLaw, Wellington for Plaintiffs

Sean Joyce Jones Young, Auckland for Defendants

“Clifford J”