Regan v Brougham

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA666/2017
[2018] NZCA 157

BETWEEN	CHRISTINE ANNA ELIZABETH REGAN AND MARK JEFFEREY TUFFIN Applicants
AND	BRYCE BROUGHAM First Respondent
RACHEL CHRISTINA DEY Second Respondent

Hearing:	30 April 2018
Court:	French, Cooper and Winkelmann JJ
Counsel:	F A King for Applicants J K Mahuta-Coyle for First Respondent No appearance for Second Respondent
Judgment:	18 May 2018 at 2.30 pm

JUDGMENT OF THE COURT

AThe application for leave to appeal is granted.
BCosts are reserved pending determination of the substantive appeal.

____________________________________________________________________

REASONS OF THE COURT

(Given by French J)

The applicant trustees seek leave under s 67 of the Judicature Act 1908 to appeal a decision of Simon France J in the High Court.[1] Leave is required because an appeal to this Court would be a second appeal, Simon France J’s decision being itself an appeal from the District Court.[2] In both the District Court and the High Court, the applicants claimed unsuccessfully that the first respondent had personally guaranteed a loan of $50,000 made by the trust to a company of which he was a director.[3]
[1]Regan v Brougham [2017] NZHC 1091 [HC substantive decision]. Justice Simon France declined an application for leave to appeal to this Court: Regan v Brougham [2017] NZHC 2464.
[2]Regan v Brougham [2016] NZDC 18553 [DC decision].
[3]The second respondent was joined by the first respondent as a third party at first instance, the first respondent claiming that she would be liable as a co-guarantor if he was. He was unsuccessful in that claim and the findings of the courts below on that point are not currently the subject of the application for leave to appeal.
Both the District Court and the High Court held there was no enforceable contract of guarantee. In their view, although the first respondent signed the loan agreement twice — as representative of the borrower and as guarantor — the loan agreement did not satisfy the requirements for a guarantee imposed by s 27 of the Property Law Act 2007. The loan agreement contemplated a separate deed of guarantee being prepared and it was no answer for the trustees to say they had waived the requirement for a separate deed in the belief shared by them and the first respondent that a separate deed was not necessary.[4] Both Judges also held the trustees could not invoke equitable doctrines including estoppel to overcome non-compliance with s 27.
[4]HC substantive decision, above n 1, at [19]–[25]; and DC decision, above n 3, at [24]–[28].
We have determined that leave should be given. We are satisfied that there are questions in the proposed appeal that are capable of serious argument and that despite the modest amount at stake, it does involve interests of sufficient importance that outweigh the cost and delay of a further appeal.
In particular, we note the loan agreement was a standard ADLS form and therefore its construction is a matter of general importance. We note too the existence of previous authority — not cited to Simon France J — which has held that when a person signs a loan agreement as guarantor, he or she can be taken as agreeing to guarantee something and that in the absence of words of limitation, the natural and only reasonable inference is that they are agreeing to guarantee all the obligations of the principal debtor contained in the document.[5] Further, the issue of whether and when equity can be invoked to overcome the effects of non-compliance with s 27 is a novel one.
[5]Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC) at 117–118.
We acknowledge the submission made on behalf of the first respondent that as the case has made its way through the court system some of these issues have not been as clearly articulated as they might have been. However, when pressed to point to any consequential prejudice to the first respondent such as evidence that might have been called but was not in reliance on the pleadings, counsel was unable to identify anything of significance.
The application for leave to appeal is granted.
As regards the costs on the application, we consider these should be reserved. They can be determined by the Court which hears the substantive appeal.

Solicitors:
F K Legal, Hamilton for Applicants
Macalister Mazengarb, Wellington for First Respondent
Grantham Law, Hamilton for Second Respondent

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, Christine Anna Elizabeth Regan and Mark Jeffrey Tuffin applied for leave to appeal against a decision of Simon France J in the High Court. The applicants sought to establish that the first respondent, Bryce Brougham, had personally guaranteed a $50,000 loan made by the trust to a company of which he was a director. The second respondent, Rachel Christina Dey, was joined by the first respondent as a third party at first instance, claiming she would be liable as a co-guarantor if he was. The Court of Appeal granted the application for leave to appeal and reserved costs pending determination of the substantive appeal.

The central legal issue in this case was whether the first respondent had personally guaranteed the loan made by the applicants' trust to a company of which he was a director. The District Court and the High Court had previously ruled that there was no enforceable contract of guarantee, as the loan agreement did not satisfy the requirements for a guarantee imposed by s 27 of the Property Law Act 2007. The applicants argued that the first respondent had signed the loan agreement twice, once as a representative of the borrower and once as a guarantor, and that they had waived the requirement for a separate deed of guarantee. The Court of Appeal considered the arguments and determined that there were questions in the proposed appeal that were capable of serious argument, and that the interests involved outweighed the cost and delay of a further appeal.

The Court of Appeal noted that the loan agreement was a standard ADLS form, and therefore its construction was a matter of general importance. They also acknowledged previous authority which held that when a person signs a loan agreement as a guarantor, they can be taken as agreeing to guarantee something and that in the absence of words of limitation, the natural and only reasonable inference is that they are agreeing to guarantee all the obligations of the principal debtor contained in the document. The Court of Appeal considered the issue of whether and when equity can be invoked to overcome the effects of non-compliance with s 27 to be a novel one. Although the submission was made on behalf of the first respondent that some of these issues had not been as clearly articulated as they might have been, counsel was unable to identify any consequential prejudice to the first respondent such as evidence that might have been called but was not in reliance on the pleadings. Therefore, the Court of Appeal granted the application for leave to appeal and reserved costs pending determination of the substantive appeal.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established