Roger Grant Puttick v Whangarei District Council
[2000] NZCA 50
•15 May 2000
| IN THE COURT OF APPEAL OF NEW ZEALAND | CA116/99 |
| BETWEEN | ROGER GRANT PUTTICK |
| Appellant |
| AND | WHANGAREI DISTRICT COUNCIL |
| Respondent |
| Hearing: | 15 May 2000 |
| Coram: | Richardson P Henry J Doogue J |
| Appearances: | Appellant in person H Cull QC for the Respondent |
| Judgment: | 15 May 2000 |
| JUDGMENT OF THE COURT DELIVERED BY HENRY J |
This appeal is against a summary judgment entered against Mr Puttick in the High Court at Auckland. In his decision of 12 April 1999, Master Kennedy-Grant accepted that there was no arguable defence to the respondent Council’s claim under a guarantee given by Mr Puttick for a sum of $73,792.16 plus accrued interest, and a further claim for costs and disbursements relating to enforcement of the guarantee in the sum of $51,936.52. It must be said at the outset that none of the grounds of appeal argued in this Court featured in the hearing before the Master as possible defences to the Council’s claims.
Mr Puttick and two other persons entered into two related agreements with the Council in respect of premises it owned in Whangarei and which were formerly used for purposes of the Royal Mint. The documentation included guarantees given by all three in respect of both the agreements, which were for sale and purchase of the property and for its lease pending delayed settlement of the purchase. The purchaser and lessee was a company to be formed. It later was formed, but is now in liquidation. The summary judgment claim was based on defaults under the lease. The guarantee provided that if there should be more than one guarantor, liability shall be “on a pro rata basis”. The Master held that the meaning of the guarantee was clear and not void for uncertainty. He held, correctly in our view, that on its proper construction the provision meant that each of the three guarantors was liable, and only liable, according to his respective shares in the venture, which in the circumstances must be based on equality. Each was therefore liable to the extent of one‑third of any liability of the principal party. The Master rejected further defences raised by Mr Puttick, namely that the guarantee had not been properly executed by all parties, that there had been pre‑contractual misrepresentation by the Council, and that the Council had unlawfully interfered with Mr Puttick’s contractual negotiations with other parties. Those matters are no longer in issue, but three additional grounds of appeal are now promoted.
Background
The lease in question is dated 15 August 1996, and stipulated a term of two years commencing 6 August 1996. The tenant covenanted to pay rent and defined outgoings, and default interest at 14% per annum. The lease was stated as being collateral to the agreement for sale and purchase. That agreement was also entered into on or about 6 August 1996. The purchase price was $2,475,000 inclusive of GST, payable as to $75,000 on execution and a further $200,000 14 days after possession with the balance being payable on settlement, being 6 August 1998. Possession of the property was duly given and taken.
Rental payment obligations under the lease were not met, and the Council sought to recover arrears and unpaid rates totalling $221,376.49 due as at 6 August 1998. Mr Puttick’s one‑third share of that debt was $73,792.16 which formed the basis of the summary judgment claim against him.
The agreement for sale and purchase was cancelled by the Council for breach by the purchaser. The Council has retained the amount paid by the purchaser, namely $275,000.00. The agreement provided for forfeiture of the deposit, but not exceeding 10% of the purchase price.
Rent in default
Mr Puttick’s first complaint is that the Council received by way of rent a sum totalling $15,675.09 from the Northland Dairy Company Limited. The Council agreed to the purchaser subletting the property to Northland Dairy, but on the basis that the Council would receive the rent direct from the sublessee, if settlement of the purchase did not eventuate in accordance with the terms of the sale agreement. It is common ground that on or about 11 January 1999 the Council did in fact receive the amount of $15,675.09.
There would appear to be no reason why credit should not have been given for this receipt when the claim for unpaid rent was pursued by way of summary judgment application at the hearing which was conducted on 26 March 1999. The fact of payment should have been disclosed to the Court. The fact of payment being admitted, it is just to receive what is effectively agreed evidence. There will necessarily be a need to adjust the amount of the judgment accordingly. We do not see this omission by the Council to be of itself of sufficient gravity to warrant setting aside the judgment in its totality. Under this ground of appeal there is clearly no defence to the claim for the balance of the unpaid rent and default interest thereon.
Forfeiture of the deposit
The Council has retained the total sum of $275,000 following its cancellation of the agreement for sale and purchase. As earlier noted, this figure is some $27,500 in excess of the 10% limit set as a term of the contract. In a letter of demand dated 17 September 1998 which appears to be directed to the purchaser and the three guarantors, the solicitors for the Council sought to recover a total of $2,733,121.69 being the balance of the settlement monies due including interest for late settlement, and also arrears of rent and default interest on that. In calculating the amount of the demand, credit is given for the receipt of $275,000 although it is noted forfeiture of deposit accounted for $247,500 of the credited figure. It appears that failure to meet this demand resulted in the cancellation.
For the Council it is now contended that because it has an outstanding claim against Mr Puttick for the as yet unquantified loss of its bargain under the sale agreement, it is entitled to retain this excess. It would seem clear that if the purchaser sought to recover the $27,500 from the Council, a set off comprising the amount of the Council’s claim consequential on the cancellation could be pleaded. That claim is foreshadowed as being far in excess of $27,500. The submission by Mr Puttick however is that it must at this stage be credited against what was claimed under the summary judgment proceeding. Reliance was placed on the fact that the agreement for sale and purchase was expressed as being collateral to the lease agreement.
It is necessary to analyse the situation which has arisen. Mr Puttick’s intended defence under this ground of appeal must be that the one-third share of the indebtedness of the purchaser for which the appellant is liable under the guarantee is less than what remains unpaid under the lease. That can only be the case if the Council does not have a legitimate claim outstanding against the purchaser exceeding $27,500. There is evidence before the Court that there will be a substantial loss on resale of the property, a step which is presently being undertaken. The highest offer to date is $1,650,000. In the circumstances, we doubt whether it can be said to be realistically arguable that, subject to consideration of the next ground of appeal, the ultimate loss will not exceed the amount in question. Added to that is the important fact that this issue was not raised before the Master in the High Court. Mr Puttick was at that time well aware of the payment of the $275,000, and the retention of it by the Council. It is now too late to attempt to bring it into account.
Payments by the co-guarantors
There is evidence that the other two co‑guarantors have each agreed to pay the Council $110,000 in settlement of claims arising out of the cancellation of the sale agreement and under the lease provisions. It is unclear when the deed of settlement recording that agreement was entered into. Neither is it clear when Mr Puttick became aware of the existence of those agreements, but it must have been prior to the hearing before the Master. Disclosure was made in an affidavit in support of the application for summary judgment sworn on 12 February 1999, which obviously was in evidence at the March hearing. Again, the failure to raise this issue before the Master is fatal to it being an acceptable appeal point.
That apart, there is no proper basis for attributing the settlement monies (which have not yet been paid in full) to the judgment sum in question. In so far as they include monies due under the lease, they can only be in respect of the individual liabilities of the two co‑guarantors. By reason of the several nature of the guarantees, they do not impinge on Mr Puttick’s liability in that respect, or indeed in respect of the sale agreement. Furthermore, in so far as they do include claims arising under the sale agreement, they are irrelevant to any issue arising under the lease. Ms Cull was also right in submitting that the creditor in a situation such as the present is able to appropriate payments to a particular debt (Fahey v MSD Spiers Ltd [1975] 1 NZLR 240,245). That is an added difficulty in the way of the appellant’s argument.
Associated with this ground of appeal was a submission that the settlements operated in law as a discharge of Mr Puttick’s guarantee. This argument is misconceived. The relevant legal proposition is set out in The Modern Contract of Guarantee, O’Donovan and Phillips 3rd edition at p382:
If there is no express or implied term that the co‑guarantors shall remain parties to the agreement, the release of a co‑guarantor will not discharge the other guarantors from all liability, but they will be released to the extent that their right of contribution has been taken away or prejudiced by the release.
Here there is no express term of the guarantee that all co‑guarantors shall remain parties to it. Neither is there any room for such an implied term, in the face of the express “pro rata” provision earlier discussed. The principle relied upon has no application to the facts of this case. No question of removing or prejudicing any right of contribution could arguably arise.
Costs
Mr Puttick submitted that the order for solicitor and client costs in the sum of $51,936.52 could not be supported. He contended first that liability for costs on that basis was not a term of the guarantee. We do not agree. Mr Puttick and the other two guarantors to the lease are also expressed as being guarantors under the sale agreement. The agreement stipulates that default under the agreement constitutes default under the lease. The lease expressly confers on the landlord a right to recover such costs, and the provision must apply here. The amount allowed by the Master comprised one-third of the actual costs incurred prior to the settlements effected with the other co‑guarantors, and the full amount of those incurred afterwards. We can discern no error of principle in that approach.
The Master also took the considered view that the amounts were properly incurred. There is no cause for us to interfere with that assessment on appeal. The fact that judgment was entered for $73,692.16 plus interest of $6,310.90 does not demonstrate costs at this level were unreasonable. They included attendances relevant to the cancellation of the agreement, as well as recovery of the unpaid rent and outgoings. It can be noted that the proceeding has a somewhat lengthy history.
Result
The appeal is allowed, but only to the extent of reducing the amount of the judgment in order to take into account the amount of rent received from the subtenant, from $73,792.16 to $68,567.13. The amount of the interest judgment from 11 January 1999 to 12 April 1999 will also be adjusted accordingly to the sum of $6128.15.
The appeal having substantially failed, there will be an order for costs in favour of the respondent in the sum of $2500 plus disbursements to be settled by the Registrar if necessary. In making this discretionary award we have not overlooked the contractual provision relating to recovery by the respondent of its enforcement costs.
Solicitors
Law Group, Whangarei, for Respondent
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