Regan v Brougham

[2017] NZHC 2464

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE WHANGANUI-Ā-TARA ROHE

CIV 2016-483-40 [2017] NZHC 2464

BETWEEN

CHRISTINE ANNA ELIZABETH

REGAN AND MARK JEFFEREY TUFFIN

Applicants

AND

BRYCE BROUGHAM First Respondent

AND

RACHEL CHRISTINA DEY Second Respondent

Hearing:	6 October 2017 (Teleconference)
Counsel:	F King for Applicants J K Mahuta-Coyle for First Respondent S A McKenna in attendance
Judgment:	6 October 2017

JUDGMENT OF SIMON FRANCE J (leave for second appeal)

[1]      This is an application to bring a second appeal to the Court of Appeal.

[2]      At issue is a loan of $50,000 advanced by the applicants’ Trust to a start up company.  At the time of the loan, one of the two directors of the new company was a trustee of the Trust.  The other director was her then de facto partner.  The original

plan was for the loan to be guaranteed by each of the directors as to $25,000 each.

REGAN AND TUFFIN v BROUGHAM [2017] NZHC 2464 [6 October 2017]

[3]      The loan agreement was a standard ADLS form.  It contemplated the entering into of a separate Deed of Guarantee, an event which was to be a pre-condition to the advancing of the money.   Mr Brougham  as the second director signed the loan agreement  twice  –  as  borrower  and  guarantor.    The  other  director,  the  trustee Ms Susan Dey, signed as borrower but not guarantor.   No separate guarantee was prepared or signed.   The consistent position of the Trust was that it waived the requirement for the borrowers to sign a deed of guarantee.

[4]      Both the District Court1 and the High Court2 held the loan agreement did not satisfy the requirements for a guarantee as set out in s 27 of the Property Law Act 2007.  That section requires that guarantee contracts be in writing and signed. Mr Brougham had signed but both courts considered the complete absence of any terms of the guarantee contract meant s 27 was not satisfied.   It is not sought to appeal this aspect.

[5]      The   trustees   alternatively   claimed   equity   should   intervene   to   hold Mr Brougham to his promise.  It was submitted the case was indistinguishable from Chambers v Chatfield,3 an agreement to lease case.  It was there held that a clause in the agreement to lease constituted a covenant to enter into a contract of guarantee. The contract of guarantee was identified by reference to a standard form.  The High Court ruled that equity would treat as being done that which ought to be done,

namely the signing of a guarantee.  Section 27 of the Property Law Act 2007 was not an  impediment  because  what  was  being  enforced  was  the  covenant  and  the agreement to lease.

[6]      On  the  appeal,  I  distinguished  Chambers  on  the  basis  that  specific performance  of  the  covenant  in  the  term  loan  agreement,  if  there  was  such  a covenant, would not be ordered.  This again came back to the lack of certainty as to the terms of the guarantee contract.   It was also seen as relevant that unlike the agreement to lease situation, the term loan agreement contemplated the would-be

guarantor seeing the guarantee and signing it before money was advanced.  Further,

1      Winchester Trust v Brougham [2016] NZDC 18533.

2      Regan and Tuffey v Brougham [2017] NZHC 1091.

3      Chambers v Chatfield [2010] NZHC 1871.

the Trust accepted it had waived the requirement to sign a separate guarantee, so what should have been done but was not, that equity would treat as done?

[7]      In passing, but without developing or deciding the point, I raised a query whether it was permissible to use equity in the way it previously had been to avoid what could be argued to be the clear intent of a consumer protection provision such as s 27.   However, because of the view I otherwise took, it was not necessary to consider it further.

[8]      The applicant wishes to argue on a second appeal:

(a)       that the analysis in the judgment of the equitable principles is flawed;

and

(b)that there is a public interest in the issue of the relationship between these authorities and s 27.

[9]      Concerning  equitable  principles,  it  is  submitted  the  judgment  wrongly conflates equitable estoppel and specific performance.  Had they been kept separate, there would have been greater focus on the relevant decisions in Tait-Jamieson v Cardrona Ski Resort and Northcolt v Davidson.4   The latter was addressed in written submissions before the High Court; the former was just touched on.

[10]     In Tait-Jamieson, the defendant was one of three who had written a letter guaranteeing payment of ski training fees for a season.   The letter was written subsequent to an oral agreement and there was certainty as to terms.  French J held that  the  letter  writer  was  estopped  from  relying  on  the  terms  of  the  Contracts

Enforcement Act.

4      Tait-Jamieson  v  Cardrona  Ski  Resort  HC  Invercargill  CIV-2010-425-181, 16 August 2011;

Northcolt v Davidson HC Whangarei CIV-2012-488-97.

[11]   Although not focused on in written submissions before me, there was undoubtedly an opportunity in my judgment to have addressed both this case and Northcott v Davidson.   It does not seem appropriate now on a leave judgment to provide full reasons why they were not seen as determinative.   It is clear that I consider they are different  in  their circumstances,  and  do  not  bind  this  Court’s assessment of the facts of the particular case.   Generally, I consider Northcott v Davidson does not particularly assist the applicant as it would accord greater primary to s 27, as would I.

[12]     Overall, I consider there is a question of law of public interest concerning whether and when equity can be used to overcome the effects of non-compliance with s 27 of the Property Law Act 2006.  My doubt is as to whether this is the correct case.  Because of those doubts I am going to decline leave, with recognition that the Appeal  Court  may  think  the  matter  merits  further  consideration.    The  primary reasons for declining leave are:

(a)      the concurrent findings that the agreement itself does not constitute a contract of guarantee;

(b)if the agreement does contain a covenant to enter a guarantee (questionable), the complete lack of terms of that guarantee, the fact it was a pre-condition to the advancing of any money and the applicant’s waiver of the obligation to sign a guarantee; and

(c)      the fact the loan is for $50,000, calling into question whether the twice successful respondent should be exposed to further costs.

[13]     The application is dismissed.   The first respondent is entitled to standard costs.  The second respondent observed but did not participate, and no award of costs

is sought or appropriate.

Simon France J