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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Regan v Brougham

Details

AGLC: Regan v Brougham [2017] NZHC 2464
Case: [2017] NZHC 2464
Decision Date: 6 October 2017

CaseChat Overview and Summary

In the case of Regan and Tuffey v Brougham, the applicants sought a second appeal to the Court of Appeal regarding a $50,000 loan advanced by the applicants’ Trust to a start-up company, with one of the directors being a trustee of the Trust. The loan agreement was in the form of a standard ADLS form, and it was a pre-condition that the borrowers would sign a Deed of Guarantee before the money was advanced. Mr Brougham, the second director, signed the loan agreement twice as both borrower and guarantor, while the other director, the trustee Ms Dey, signed as borrower but not as guarantor. The Trust argued that it had waived the requirement for the borrowers to sign a deed of guarantee.

The District Court and the High Court both held that the loan agreement did not satisfy the requirements for a guarantee as set out in s 27 of the Property Law Act 2007, which requires guarantee contracts to be in writing and signed. The courts ruled that the complete absence of any terms of the guarantee contract meant s 27 was not satisfied. The trustees alternatively claimed that equity should intervene to hold Mr Brougham to his promise. The High Court ruled that equity would treat as being done that which ought to be done, namely the signing of a guarantee. However, the appeal was distinguished from Chambers v Chatfield, and the lack of certainty as to the terms of the guarantee contract was a significant factor in the decision.

The applicants sought a second appeal, arguing that the analysis in the judgment of the equitable principles was flawed and that there was a public interest in the issue of the relationship between these authorities and s 27. However, the judge declined leave for the second appeal due to the concurrent findings that the agreement itself does not constitute a contract of guarantee, the lack of terms of the guarantee contract, the applicant's waiver of the obligation to sign a guarantee, and the fact that the loan was for $50,000. The application was dismissed, and the first respondent was entitled to standard costs. The second respondent observed but did not participate, and no award of costs was sought or appropriate.

Orders