Sheppard Cycles New Zealand Limited v Wilkinson

[2025] NZHC 1972

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2966

[2025] NZHC 1972

BETWEEN

SHEPPARD CYCLES NEW ZEALAND LIMITED
Plaintiff

AND

TONY CHARLES WILKINSON

First Defendant

JADE KELLY WILKINSON
Second Defendant

TONY CHARLES WILKINSON, JADE KELLY WILKINSON and ROSS KENNERLEY TRUSTEE LIMITED as

trustees of the T&J WILKINSON TRUST Third Defendants

Hearing:

30 May 2025

Appearances:

ZP Zhao for the Plaintiff

K Lydiard for the First Defendant, Second Defendants and First and Second Named Third Defendants
L McNeely for the Third Named Third Defendant

Judgment:

17 July 2025

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 17 July 2025 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Lowndes Jordan, Auckland Base Law, Auckland

Glenie Legal Limited, Auckland

SHEPPARD CYCLES NEW ZEALAND LTD v WILKINSON [2025] NZHC 1972 [17 July 2025]

Table of Contents

Introduction  [1]

Summary judgment principles  [10]

Issues  [13]

Is it reasonably arguable that the guarantee in the Second Agreement only guarantees the amounts owing under the Second Agreement?  [14] Is it reasonably arguable that the third defendants are not guarantors of the

First Agreement?  [18]

Written Contract of Guarantee Required  [19] Has the plaintiff established the amount for which the defendants are liable under each of the First and Second Agreements?  [47] Do the defendants have a reasonably arguable defence based on the prevention principle?     [64]

Should summary judgment be entered on liability only?  [95] What are the appropriate terms of any order against the third named third defendant?     [99]

Result  [107]

Costs  [108]

Introduction

[1]                Sheppard Cycles New Zealand Limited (Sheppard) is a bicycle wholesaler and seeks summary judgment for outstanding debts under four agreements that it alleges are guaranteed by the defendants.

[2]                The first and second defendants, and first and second named third defendants, Tony and Jade Wilkinson, are the directors and shareholders of Avantiplus Botany Limited (in liquidation) (ABL). The third defendants are the trustees of the T&J Wilkinson Trust (Trust) which was settled on 27 August 2018 and whose core asset is Tony and Jade Wilkinson’s family home.

[3]                The first and second defendants, and the first and second named third defendants (the Wilkinsons) oppose summary judgment in respect of all orders sought. The third named third defendant is the independent trustee of the Trust (Independent Trustee) and only opposes the application on limited grounds relating to the nature and extent of his liability. It otherwise abides or does not oppose the remaining aspects of the application.

[4]                The four agreements under which the plaintiff says the debts arise are two dealership agreements, the first for MYRIDE Botany (First Agreement) and the second

for MYRIDE Takapuna (Second Agreement), together with the agreement for sale and purchase of the business in respect of MYRIDE Takapuna (SAP) and a deed of sublease also in respect of the Takapuna store (Sublease).

[5]                It is not in dispute that all defendants are the guarantors to the Second Agreement, the SAP and the sublease, including the third defendants, the trustees of the T&J Wilkinson Trust (Trust).

[6]                The First Agreement, by contrast, does not list the T&J Wilkinson Trust or its trustees as guarantors in the relevant schedule. However, Ross Kennerley signed the First Agreement on behalf of Ross Kennerley Trustee Limited, one of the three trustees of the Trust. The signature block records that the signature was “(in his/her own right and as trustee of T&J Wilkinson Trust), 3rd guarantor”. An issue therefore arises whether the Trust is a guarantor of the First Agreement.

[7]                The plaintiff's evidence does not distinguish between the amounts owing under the First and Second Agreements. This is because the plaintiff says the Trust is a guarantor of both the First and Second Agreements and the Wilkinsons themselves ran the MYRIDE Botany and MYRIDE Takapuna businesses as one operation so there is no need to. The plaintiff submits such distinction is also unnecessary because even if the Trust is not a guarantor of the First Agreement, the guarantee clause in the Second Agreement extends to all amounts owing by the defendants.

[8]                The Wilkinsons dispute liability under all four agreements on the basis of the prevention principle, that the actions of Sheppard have caused the inability of ABL to repay the amounts owing. In addition, the Wilkinsons dispute that the Trust provided a guarantee of the First Agreement or that the guarantee in the Second Agreement extends to all amounts owing. Furthermore, they say they did not operate the stores as one operation and that an analysis by Ms Wilkinson shows that 90 percent of the amount owing is under the First Agreement and 10 per cent under the Second Agreement.

[9]                Sheppard does not accept there is any basis for a defence based on the prevention principle and submits that summary judgment should at least be entered

for the lower of the amounts calculated by Ms Wilkinson as owing under the Second Agreement, being $101,677.62 (GST inclusive), plus the amount owing under the SAP of $165,048.38 (zero rated for GST) plus $12,885.96 (GST exclusive) under the Sublease.

Summary judgment principles

[10]Rule 12.2(1) of the High Court Rules 2016 provides:

The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[11]            The principles applying to a plaintiff’s application for summary judgment are well established and summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:1

(a)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.2

(b)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.3

(c)The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. However, it need not accept uncritically evidence that  is  inherently  lacking  in  credibility  —  for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable.4

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]–[27].

2      Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.

3      MacLean v Stewart (1997) 11 PRNZ 66 (CA).

4      Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.

(d)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.5

[12]            A defendant is under an obligation to lay a proper foundation for their defence in the affidavits filed in support of the notice of opposition.6

Issues

[13]The issues are:

(a)Is it reasonably arguable that the guarantee in the Second Agreement only guarantees the amounts owing under the Second Agreement?

(b)If so, is it reasonably arguable that the third defendants, the trustees of the Trust, are not guarantors of the First Agreement?

(c)If so, has the plaintiff established sufficiently for summary judgment the amount for which the Wilkinsons are liable under the First and Second Agreements?

(d)Can the defendants rely on the prevention principle to avoid summary judgment being entered in respect of all or any of the amounts allegedly owing?

(e)What are the appropriate terms of any order against the third named third defendant?

Is it reasonably arguable that the guarantee in the Second Agreement only guarantees the amounts owing under the Second Agreement?

[14]            It is not in dispute that all three defendants provided a guarantee in the Second Agreement. If that guarantee extends to all amounts owing to Sheppard and not just to amounts owing under the Second Agreement, then it does not matter whether the

5      Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

6      Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.

three defendants also provided a guarantee under the First Agreement as they would be liable under the Second Agreement for all amounts anyway.

[15]            The amounts that Sheppard says are owing are $1,034,374.37 in respect of the First and Second Agreements, $165,048.38 (zero-rated for GST) under the SPA and

$12,885.96 under the Sublease.

[16]            The plaintiff relies on cl 23.14 of the Second Agreement to submit that the guarantee in that agreement extends to the full outstanding sum ABL owes to the plaintiff regardless of which agreement the debts were incurred in relation to. The guarantee clauses in the First and Second Agreements have very similar wording. I set out the guarantee clause in full from the Second Agreement here as the clause is relevant to both the first and second issues and the differences are not material to the issues before the Court:

23Guarantee and indemnity

23.1The Dealer must procure that:

(1)each Interested Party gives a guarantee and indemnity at the time of entering the Agreement on the terms set out in this clause 23; and

(2)any new Interested Party, upon request by Sheppard Cycles New Zealand, signs a guarantee and indemnity in respect of the Dealer's obligations under this Agreement on the then current terms used by Sheppard Cycles New Zealand.

For the purpose of this clause 23.1, Interested Party means any of the following persons nominated by Sheppard Cycles New Zealand:

(3)any person with a direct or indirect legal or beneficial interest in the Dealer, including an interest in any entity directly or indirectly controlling the Dealer (Controlling Entity), or in the Dealer's assets and any person who is an officer, as defined in the Companies Act, of the Dealer or any Controlling Entity; and

(4)a spouse or domestic partner of any person specified in clause 1.1(3).

23.2The Guarantor unconditionally and irrevocably guarantees to Sheppard Cycles New Zealand prompt performance of all of the obligations of the Dealer contained or implied in this Agreement. If the obligation is to pay money, Sheppard Cycles New Zealand may recover the money from the Guarantor as a liquidated debt.

23.3The Guarantor indemnifies Sheppard Cycles New Zealand and agrees to hold it harmless in respect of any failure by the Dealer to perform any of its obligations under this Agreement, including any obligation to pay money to Sheppard Cycles New Zealand.

23.4This guarantee and indemnity is a continuing security, and is not discharged or prejudicially affected by any settlement of accounts, but remains in full force until a final written release is given by Sheppard Cycles New Zealand.

23.5The Guarantor's liability under clause 23.2 is not affected by:

(1)the granting of time, forbearance or other concession by Sheppard Cycles New Zealand to any Dealer Party;

(2)an absolute or partial release of a Dealer Party or a compromise with any of them;

(3)a variation or termination of this Agreement;

(4)an assignment of this Agreement by the Dealer;

(5)any disputes or differences between the Dealer Parties and Sheppard Cycles New Zealand;

(6)the fact that this Agreement is wholly or partially void, voidable or unenforceable;

(7)the non-execution of this Agreement by 1 or more of the persons named as Guarantor or the unenforceability of the guarantee or indemnity against 1 or more of the Guarantors; or

(8)the exercise or purported exercise by Sheppard Cycles New Zealand of its rights under this Agreement.

23.6The Guarantor's liability is not discharged by a payment to Sheppard Cycles New Zealand which is later avoided by law. If that happens, the parties are restored to their respective rights and obligations as if the payment had not been made.

23.7If a liquidator or trustee in bankruptcy disclaims this Agreement, the Guarantor indemnifies Sheppard Cycles New Zealand against any resulting loss.

23.8Until Sheppard Cycles New Zealand has received all money payable to it by the Dealer, the Guarantor must: not prove or claim in any liquidation, administration, restructuring (howsoever described and including without limitation, small business restructuring), bankruptcy, composition, arrangement or assignment for the benefit of creditors; and hold any claim it has and any dividend it receives on trust for Sheppard Cycles New Zealand.

23.9If Sheppard Cycles New Zealand assigns its rights under this Agreement, the benefit of the guarantee and indemnity in this clause

23 extends to the assignee and continues concurrently for the benefit of Sheppard Cycles New Zealand regardless of the assignment unless Sheppard Cycles New Zealand releases the Guarantor in writing.

23.10If a Guarantor enters into this Agreement as trustee of a trust, then that person warrants that:

(1)that person has power to enter into this Agreement under the terms of the trust;

(2)the guarantee is being given for the benefit of and in the interests of the trust;

(3)all of the persons who are trustees of the trust have approved entry into this Agreement;

(4)that person has properly signed this Agreement in accordance with the terms of the trust;

(5)that person has the right to be indemnified from the assets of the trust and that right has not been lost or impaired by any action of that person including entry into this Agreement.

23.11If that person has no right to or interest in any of the assets of the trust except in that person's capacity as trustee of the trust, that person's liability under this Agreement shall not be personal and unlimited but shall be limited to an amount equal to the value of the assets of the trust that are available to meet that person's liability unless the right of that person to be indemnified from the assets of the trust has been lost and in which case that person's liability under this guarantee shall be personal and unlimited.

23.12Each Guarantor will pay on demand all costs and expenses (including all taxes and legal expenses actually payable by Sheppard Cycles New Zealand to its legal representatives, whether or not pursuant to a costs agreement) sustained or incurred by Sheppard Cycles New Zealand as a result of the exercise of, or in protecting or enforcing or otherwise in connection with, its rights under this clause 23.

23.13Time shall be deemed to be of the essence in relation to any matter or thing required to be done by the Guarantor including but without limitation the payment of any money or the performance of any obligation under this clause 23.

23.14Each Guarantor charges in favour of Sheppard Cycles New Zealand with payment of all monies owed to Sheppard Cycles New Zealand by the Dealer and/or any of them (whether pursuant to this Agreement or otherwise) all their estate and interest in any real property and and/or in any other assets whether tangible and/or intangible in which they now have any legal and/or beneficial interest and/or in which they later acquire any such interest and they agree to execute request a registrable mortgage or charge (as applicable) in favour of Sheppard Cycles New Zealand over such property.

23.15The Guarantors charge in favour of Sheppard Cycles New Zealand all of their estate and interest in any real property that the Guarantors own at present and in the future with the amount of their indebtedness hereunder until discharged, such indebtedness to include all amounts referred to in this Agreement.

23.16The Guarantors grant a security interest in favour of Sheppard Cycles New Zealand in all of their estate and interest in any personal property that the Guarantors own at present and in the future with the amount of their indebtedness hereunder until discharged, such indebtedness to include all amounts referred to in this Agreement.

The Wilkinsons dispute the interpretation of cl 23.14 put forward by the plaintiff. The Wilkinsons submit that cl 23.2 sets out the guarantee agreed to, and that is that each guarantor “unconditionally and irrevocably guarantees to [Sheppard] prompt performance of all of the obligations of [ABL] contained or implied in this Agreement”. The Wilkinsons submit that clauses 23.14 to 23.16 relate only to charges granted by the guarantors in favour of Sheppard and cannot operate to alter or extend the scope of the guarantee as set out in clause 23.2. Applying the usual principles of contractual interpretation, the Wilkinsons submit that it cannot be correct that the wording of cl

23.14 extends the scope of the guarantee beyond the clear wording of cl 23.2.

[17]               I consider the interpretation put forward by the Wilkinsons is clearly arguable just on the words of the guarantee itself. Summary judgment cannot therefore be entered on the basis that the guarantee agreed to in the Second Agreement extends to all obligations owing by ABL as opposed to only the obligations under the Second Agreement. It is therefore necessary to consider whether the third defendants provided a guarantee of the First Agreement.

Is it reasonably arguable that the third defendants are not guarantors of the First Agreement?

[18]            The plaintiffs say that it is evident on the face of the First Agreement, reflects the intentions of the parties and is further evidenced by the conduct of the parties that the third defendants are guarantors of the First Agreement. To the extent that the Trust and its trustees are not described as a guarantor under item three, Schedule 1 of the First Agreement, the plaintiff submits that it is not material and does not have the consequences that the guarantee has not been given.

Written Contract of Guarantee Required

[19]            Section 27(2) of the Property Law Act 2007 (PLA) requires a contract of guarantee to be in writing and signed by the guarantor. Section 27(4) of the PLA defines a “contract of guarantee” as “a contract under which a person agrees to answer to another person for the debt, default, or liability of a third person.”

[20]            In Brougham v Regan, the Supreme Court held that if the document signed by the person said to be a guarantor does not include an agreement to answer for the debt, default or liability of a third person, it is not a contract of guarantee under s 27(2).7

[21]            Counsel for the plaintiff submits that in Brougham the Supreme Court was concerned with the situation where there were no terms of guarantee contained in the contract as the contract in that case anticipated a separate deed of guarantee being entered into, and that here, the contract clearly did include the terms of the guarantee.

[22]            However, the relevant question is whether the contract clearly includes an agreement by the Trust to answer for the debt, default or liability of ABL, as a contract of guarantee is defined in s 27(4).  As the Supreme Court held in Brougham v Regan:8

In the present case, the Loan Agreement does not include any provision under which Mr Brougham agrees to answer to the Trustees for the debt, default or liability of the company. On the contrary, the Loan Agreement makes it clear that a separate document to that effect is required as a condition precedent to the making of the advance. In the absence of that further document, no guaranteed liability arises. The decision of the Court of Appeal in this case was predicated on the finding that “[t]he Agreement (and thus the obligations being guaranteed) is in writing”. With respect to the Court of Appeal, we do not consider that means the loan agreement meets the requirements of s 27(2) in the absence of any provision in the Loan Agreement under which Mr Brougham agrees to guarantee the company’s obligations.

[23]            Considering the facts here, the parties to the First Agreement are recorded as the plaintiff, the dealer, and the guarantor. The guarantor is as defined in Item 3 of Schedule 1 of the First Agreement. Item 3 of Schedule 1 lists Tony and Jade Wilkinson and then records “[INSERT ANY OTHER GUARANTORS REQUIRED]”. Neither the trustees nor the Trust itself is referred to.

7      Brougham v Regan [2020] NZSC 118, [2020] 1 NZLR 315 at [35].

8 At [36].

[24]            The plaintiff submits that the terms of the guarantee themselves clearly indicate that the Trust was to be included as cl 23.1 provides that the dealer must procure that each interested party gives a guarantee and indemnity at the time of entering into the First Agreement on the terms set out in clause 23.   “Interested party” is defined in   cl 23.1 for the purposes of that clause as follows:

For the purposes of this clause 23.1, Interested Party means any of the following persons nominated by [Sheppard]:

3.any person with a direct or indirect legal or beneficial interest in the Dealer, including an interest in any entity directly or indirectly controlling the Dealer (Controlling Entity), or in the Dealer’s assets and any person who is an officer as defined in the Companies Act, of the Dealer or any controlling entity; and

4.a spouse or domestic partner of any person specified in cl 1.1(3) (the plaintiff notes the reference to cl 1.1(3) ought to be cl 23.1(3)).

[25]            The opening part of the definition of “Interested Party” requires the interested party to be “nominated” by Sheppard so even if the trustees of the Trust fall within the definition of Interested Party it is reasonably arguable that they would still need to be nominated by Sheppard. In any event cl 23.1 simply requires ABL to procure interested parties to give a guarantee. This would not create a contract of guarantee by the interested parties if they were not named in the schedule but instead an action against ABL for failing to procure that party.

[26]            Furthermore, the Second Agreement’s Item 3 of Schedule 1 lists Tony and Jade and the three third defendants as the trustees of the Trust but still also includes “[INSERT ANY OTHER GUARANTORS REQUIRED].” The reference in square brackets appears therefore to have been included in the standard agreement rather than indicating more.

[27]            The fact that the trustees have not been named as guarantors in Item 3 of Schedule 1 in the First Agreement or fully in the signature blocks, as for the Second Agreement, means that it is reasonably arguable that the Trust has not been nominated by Sheppard and that the Trust has not agreed to guarantee. It is therefore reasonably arguable that the requirements of s 27(2) of the PLA for there to be a written contract of guarantee by the trustees are not met.

[28]            Sheppard submits that viewed objectively and robustly it was the clear intention of the parties that the third defendants provide a guarantee under the First Agreement.

[29]            Darin Te Paa, the New Zealand country manager for Sheppard deposes in reply evidence that the first defendant, Tony Wilkinson, was an employee of Sheppard and had always been familiar with Sheppard's practice of requiring a guarantee from its owner-operators "to ensure that directors and related parties [as defined in the dealership agreement] were invested in their business, and to make sure Sheppard's financial risk was properly secured when guarantors owned key assets." Mr Te Paa’s evidence is that this requirement has never changed throughout the material period.

[30]            Furthermore the plaintiff points to the fact that the first and second defendants arranged for the signing of the First Agreement by the Independent Trustee as follows:

(a)The first defendant asked Sheppard whether the trustees can witness each other's signatures and was informed by Sheppard that it was not appropriate for signatories to witness each other's signature. The first defendant therefore arranged for someone else in the neighbourhood to witness the first and second defendant's signature on the First Agreement. That conversation was supported by an email from the first defendant, where he agreed to have their signatures witnessed appropriately and, importantly, then "couriered to Ross".

(b)In an email from the second defendant to Sheppard on 1 October 2019, where the second defendant confirmed that she had "spoken to Ross (Trustee)" and confirmed that "he definitely sent the signed agreement to [Sheppard], back in June."

[31]            The plaintiff submits that there can be no explanation as to why the first and second defendants actively facilitated the procurement of the Independent Trustee’s signature on the First Agreement other than they intended for the Trust (via its trustees) to be a guarantor to the First Agreement.

[32]            Mr Te Paa’s evidence is that the first and second defendants’ family home is the only meaningful asset available to secure ABL’s obligations to Sheppard and that Sheppard would not have entered into the First Agreement without it being offered as security and the first and second defendants were aware of that.

[33]            Sheppard further points to the removal of a clause granting a mortgage to support Sheppard’s submission that the intention was for the Trust to provide a guarantee.

[34]            The Wilkinsons give evidence that they did not intend the third defendants to provide a guarantee under the First Agreement, that they negotiated to ensure the third defendants did not do so and that they did not sign the First Agreement as guarantors in their capacities as trustees of the Trust. Their submission is that it can only be a mistake that the third named third defendant signed the First Agreement as a guarantor.

[35]            The Wilkinsons submit their home was only transferred to the Trust in 2018, not long before the First Agreement was entered into and, from an objective and commercial point of view, placing the family home in the Trust would make little sense if the intention was for the trustees to provide a guarantee. They say that by having the family home in the Trust and only providing personal guarantees, the family home was kept separate from the Wilkinsons’ business dealings.

[36]            Furthermore, the defendants point to the fact that at the time of entering the Second Agreement, the trustees entered resolutions resolving amongst other things that the trustees would provide guarantees, including in the Second Agreement, and that this step did not happen at the time of entering into the First Agreement.

[37]            Finally, counsel for the Wilkinsons submits that removal of the mortgage clause, as referred to by Mr Te Paa in reply, may have been because the Trust was not providing a guarantee so there could be no mortgage.

[38]            The plaintiff relies on Tait-Jamieson v Cardrona Ski Resort Ltd where the Court found an individual liable in relation to a written guarantee (without a signature, but with a typed name). The doctrine of estoppel was applied (even though it was not

pleaded) because the terms of the guarantee were in writing, there were express representations the guarantee would be honoured, and the guarantor was aware that the guarantee was being relied on.9 The Court observed:10

In my assessment, this is very much a case of someone attempting to evade his liability on what a layperson would not unreasonably see as a technical loophole.

[39]            The Wilkinsons say in response that Tait-Jamieson v Cardrona Ski Resort concerned a contract that was dated 31 July 2007 so s 27(2) of the PLA did not apply as it did not come into force until 1 January 2008.

[40]            In Brougham v Reagan, the Supreme Court held that cases decided under the previous Act needed to be treated with caution.11 And that any attempt to rely on the intention of the parties, essentially an estoppel argument, would effectively undermine the requirements of s 27(2) of the PLA.12

[41]            The plaintiff submits that none of this in fact matters as the Trust is bound by the signature of Mr Kennerley as a matter of  actual  ostensible authority relying on cl 23.10 of the guarantee clause. This clause provides that if a guarantor enters into the agreement as trustee of a trust then that person warrants that person has power to enter into the agreement under the terms of the trust including that all of the persons who are trustees of the trust have approved entry into this agreement.

[42]            The plaintiffs therefore say that the usual rule that trustees must act unanimously under s 38 of the Trust Act 2019 is modified by cl 23.10.

[43]            If the Trust had been listed as a guarantor in the schedule but only Ross Kennerley had signed, as he did, then cl 23.10 may have provided support for the plaintiff in enforcing the guarantee against the Trust (although I do not decide that issue). However, in this case the Trust was not named as a guarantor. Nor does the signature block itself refer to the Trust, but only to one of the trustees.

9      Tait-Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105 (HC).

10 At [74].

11     Brougham v Regan, above n 7, at [27].

12 At [59].

[44]            It is therefore reasonably arguable that this does not meet the requirement in  s 27(2) of the PLA for there to be a written contract of guarantee as it is reasonably arguable that cl 23.10 only applies to guarantors listed in the schedule, not where an individual trustee simply signs the agreement.

[45]            The fact that the signature block also records that the Independent Trustee is signing in its personal capacity further complicates matters. I acknowledge that the plaintiff has conceded for the purposes of summary judgment that this was a mistake but it raises further questions that add to the need for full consideration of the facts leading up to entry into the First Agreement.

[46]            It is therefore clearly arguable that the trustees did not provide a guarantee in respect of the First Agreement.

Has the plaintiff established the amount for which the defendants are liable under each of the First and Second Agreements?

[47]            If it is reasonably arguable that the Trust did not provide a guarantee of the First Agreement, summary judgment can only be entered if it is clear how much is owing under the First Agreement, for which the Wilkinsons alone would be liable, and how much is owing under the Second Agreement for which all three defendants would be liable (both presuming no other defences are available).

[48]            In its original evidence, Sheppard did not attempt to separate the amounts owing between the First and Second Agreements as its primary position is that the Trust has guaranteed both the First and Second Agreements and so it makes no difference. The plaintiff then submits that even if it has not, the guarantee in the Second Agreement extends to all amounts owing under the First Agreement as well. I have found it is reasonably arguable that the guarantee under the Second Agreement is confined to amounts owing under the Second Agreement and that it is reasonably arguable that the Trust did not guarantee the amounts owing under the First Agreement. In order to enter summary judgment therefore, the amounts owing under each of the Agreements need to be established.

[49]            Sheppard’s evidence is that ABL did not distinguish between its two stores when ordering goods. The Wilkinsons dispute this in their evidence with Ms Wilkinson providing an analysis of the invoices issued by Sheppard, as attached to the affidavit of Matthew Lyon, the Finance Director for Sheppard, filed in support of the summary judgment application on two bases.

[50]            Ms Wilkinson explains that from around the time the Takapuna store was purchased, ABL had a warehouse facility in Onehunga where goods were delivered. Ms Wilkinson explains that each store was treated as a separate entity, and ABL had an internal process to distribute the goods according to which store the goods had been purchased for.

[51]            Ms Wilkinson goes on to explain that in April 2023, ABL ceased having a warehouse and from that date through to when ABL ceased trading, it was clear which store the goods were being purchased for on the invoice as the store was recorded in the “ship to” address. Ms Wilkinson annexes a copy of a spreadsheet recording the “ship to” address to her affidavit and sets out a summary of the results of her analysis showing that 89 per cent of the purchases were for the Botany Store and 11 per cent for the Takapuna Store.

[52]            Ms Wilkinson acknowledges that some of the invoices attached to Mr Lyon's affidavit are from before 31 March 2023, so before ABL stopped using its Onehunga warehouse, but explains that she has carried out a similar exercise of reviewing the invoices referred to in the updated account statements attached to Sheppard’s letter of demand, for not only the bike purchases but also parts and accessories. Ms Wilkinson has then recorded in a spreadsheet the supplier invoice number, the amount, and whether the invoice was for the Botany or Takapuna store. In respect of unallocated payments on the statement, she has applied these to each store proportionately, being 90 per cent to Botany and 10 per cent to Takapuna.

[53]            Ms Wilkinson further says that in addition to the invoices identifying which store the goods were ordered for through the “ship to” field, she had close contact with Sheppard's accounts department and all goods were clearly ordered for either the Botany or Takapuna store. Ms Wilkinson's evidence is that the stores were

independently operated and had separate stock and that this gave them the ability to complete separate stock on hand reports.

[54]            In his reply affidavit for Sheppard, Mr Te Paa disputes this evidence deposing that Jade's assertions are not consistent with how ABL actually operated at the time. Mr Te Paa says:

ABL treated both MYRIDE Botany and MYRIDE Takapuna as one enterprise and of course bought all stock as ABL, because no separate entity was set up when ABL acquired MYRIDE Takapuna. This is, of course, consistent with there being no reason to apportion liability between the two agreements because ABL and Tony and Jade knew that the same parties (including the Trust) were guarantors of both agreements. In addition, even if Jade and Tony are right to split the amounts due in that way (which Sheppard doesn't agree with as I explain below), Jade's division of stock doesn't match her own records. I explain that more as well. It therefore does not reflect the commercial reality to attribute certain debts owed by ABL to each of the First Agreement and the Second Agreement.

[55]            Mr Te Paa says that the fact that ABL was operated as one enterprise is further shown by:

(a)There was only one bank account operated by ABL for both stores.

(b)The financial statements prepared for MYRIDE Takapuna only include a profit and loss account and no separate balance sheet.

(c)The Wilkinsons only raised this purported separation of debts for the first time in their opposition to the summary judgment application, which appears to be a position adopted solely for litigation purposes. Before then, there had been no suggestion that the debts were to be allocated to each contract. This arrangement would have required Sheppard to significantly change their business practices, which was never raised by ABL or implemented.

[56]            Mr Te Paa then annexes two emails from Ms Wilkinson to Sheppard which list orders and state that these were for MYRIDE Takapuna, referring to the capitalised letters “TAKA” at the end of each line. However he notes that each corresponding invoice shows the order was made under the MYRIDE Botany account and “MYRIDE

Botany Bikes” was printed as the “ship to” location (even though Mr Te Paa says the goods were picked up by ABL in practice). Mr Te Paa then lists six examples of when this has happened in the first email and two in the second, saying this shows the Botany and Takapuna stores were run as one business.

[57]            Mr Te Paa also refers to weekly costs of goods sold (COGS) reports and says these also show that MYRIDE Botany and MYRIDE Takapuna were not treated as separate enterprises by ABL or the Wilkinsons. He continues that it follows that the exercises undertaken by Ms Wilkinson in her affidavit do not appear to be accurate. In order to show how inaccurate the exercise is, Mr Te Paa explains that he has done a “spot check review” of some of the COGS reports sent through by Ms Wilkinson to Sheppard to sense check the split between the stores “which seemed plainly wrong to me based on my general recollection of how the stores performed”.

[58]            Mr Te Paa then annexes six COGS reports which he says show the split for the sampled periods when looking at the revenue generated as being roughly half.

[59]            Mr Te Paa makes a number of other points in respect of the breakdown. However the key issue is whether Sheppard has sufficiently established the amount owing under each of the First and Second agreements. I do not consider that it has as Mr Te Paa’s evidence disputes that the businesses were viewed as separate enterprises and records what he says are several inaccuracies with Ms Wilkinson’s analysis but without doing a complete analysis of his own.

[60]            Furthermore, as submitted on behalf of the Wilkinsons, the two agreements had different credit limits with the First Agreement recording that the credit limits were “TBC” whereas the Second Agreement recorded $425,000 for “Bicycles” and $75,000 for “Goods other than Bicycles”. The Wilkinsons submit that if ABL was operating both stores as one operation, it would make little sense from both Sheppard and ABL’s point of view for the credit limits to differ. The Wilkinsons further record those credit limits would have been exceeded significantly if in fact they applied across both stores.

[61]            Sheppard submits that if the amounts owing under the two agreements need to be calculated separately then summary judgment can be entered for the lower of the amounts Ms Wilkinson calculated as owing under the Second Agreement.

[62]            However, the Wilkinsons respond that the analysis performed by Ms Wilkinson was not to put forward any concession as to the amount owing under the Second Agreement but instead to show that there was a dispute as to quantum, making the claim inappropriate for summary judgment. In addition, the Wilkinsons submit they have a reasonably arguable defence that Sheppard’s actions have prevented ABL from complying with its obligations under the agreements.

[63]            I do not consider that the evidence given in reply is sufficient to establish the amounts owing under each of the agreements separately.

Do the defendants have a reasonably arguable defence based on the prevention principle?

[64]            The Wilkinsons submit that they have an arguable defence to Sheppard's claim based on what they refer to as the “prevention principle” as Sheppard's own actions have caused or contributed to ABL being unable to repay amounts owing to Sheppard.

[65]            The Supreme Court endorsed this principle in Melco Property Holdings (NZ) 2012 Limited v Hall,13 describing it as “the conception that a party to a contract must not act in such a way as to prevent the other party from enjoying the benefit of the contract.”14

[66]            In Wallace Corporation Limited v Gross,15 I applied this principle where a party was seeking to enforce a guarantee. I held that for the defendant, Mr Gross, to be able to rely on the principle, he would need to establish that it was reasonably arguable that the actions of the plaintiff in that case caused the principal debtor’s inability to repay the loan and that this provided a reasonably arguable basis for extinguishing any liability under the guarantee.

13     Melco Property Holdings (NZ) 2012 Limited v Hall [2022] NZSC 60.

14     At [38], referring to Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69.

15     Wallace Corporation Ltd v Gross [2023] NZHC 2731.

[67]            In that case, Wallace Corporation, had allegedly taken control of the borrower in its last few months prior to liquidation. It was submitted on behalf of the guarantor that the actions or inactions of Wallace Corporation had prevented a sale of the borrower and that if that sale had happened, no amounts would be owing under the guarantee.

[68]            The facts in this case are very different. However, the Wilkinsons say Sheppard caused ABL to be unable to pay amounts owed to Sheppard by the following alleged actions or omissions:

(a)The relationship was not of equal business partners as Sheppard had significant control over the way ABL operated its business, which was detrimental to ABL. For example, Sheppard prevented ABL from being able to utilise third-party dropshipping, did not allow or facilitate a profitable website and controlled ABL's stock levels and sale prices.

(b)Sheppard was also instrumental in ABL entering the business relationship and continuing to trade, a key illustration of this being events in early 2023 when ABL gave notice that it did not intend to renew the first agreement when it expired on 12 October 2023 but the Wilkinsons subsequently felt obliged to withdraw the notice due to Sheppard’s actions.

(c)When the directors of ABL tried to take steps to allow amounts to be repaid through possible sales of MYRIDE stores, Sheppard prevented the sales. Instead Sheppard pressed for the trustees to agree to a mortgage being registered against their family home.

(d)Sheppard failed to register a security interest in respect of goods provided to ABL pursuant to the First and Second Agreements and as a result, Sheppard was treated as an unsecured creditor in the liquidation of ABL. The Wilkinsons say that if Sheppard had registered a security interest, it is likely it would have been able to collect any unsold stock

and this would have reduced the amounts owing by ABL, and in turn the amounts being sought against the guarantors in this proceeding.

[69]            In the above circumstances, the Wilkinsons say Sheppard should not be able to take advantage of ABL being unable to repay outstanding amounts, resulting in Sheppard seeking to recover those amounts from the defendants in this proceeding.

[70]            Sheppard submits that the starting point is that the defendants are prima facie liable for the indebtedness because they have guaranteed the obligations of the debtor and that the courts recognise the importance of guarantees being honoured in the interests of "commercial morality". This they say recognises the broader public interest of ensuring those who give guarantees are held accountable for the commitment they entered, and on which creditors rely when deciding to give credit.16

[71]            Sheppard accepts that in fact-specific scenarios, the Courts have permitted a party in breach of contract be excused from the breach where it has been prevented from performing the relevant obligation by the breach of the other party.

[72]            In raising such a defence, Sheppard submits the onus is on the defendants to establish that it is reasonably arguable that Sheppard’s actions caused ABL's inability to repay the loan and that this provides a reasonably arguable basis for extinguishing any liability under the guarantee.17

[73]            As to the necessary nexus between the actions complained of and the impact on the defendants, Sheppard refers to the following passage from Melco where the Supreme Court held that:18

In terms of the necessary nexus between the alleged default and the prospect of fulfilment of the condition, the Supreme Court held this requires evidence that the default materially affected the prospect of fulfilment of the condition, explaining that in a situation where both parties have materially contributed to some extent to the non-fulfilment of a condition, in other words where the contribution is shared, it will be necessary to construe "material" as meaning "substantial and operating".

16     Trustees Executors Ltd v Cary [2011] RTHNZ 6 at [52].

17     Wallace Corporation Ltd v Gross [2023] NZHC 2731 at [50].

18     Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60, [2022] 1 NZLR 59 at [53] (emphasis added).

[74]            Sheppard responds to the following six matters Sheppard says Mr Wilkinson lists in his affidavit as preventing ABL from being able to repay amounts owing:

(a)Actions during Covid-19 Lockdown;

(b)Sheppard refused to update website;

(c)Sheppard controlled what brands ABL could stock and pricing;

(d)Sheppard had control over what stock was being delivered;

(e)Sheppard encouraged further purchases in mid-2022;

(f)Sheppard refused to allow ABL to sell the businesses on multiple occasions.

[75]            As a starting point, Sheppard submits that none of the alleged matters raised are material and operating causes of ABL’s nonpayment. Relevantly, Sheppard says the invoices date from 10 October 2022 and it lacks logic that a causative and operating action by Sheppard could predate the incurring of the unpaid indebtedness. In any event, Sheppard says the alleged matters are not material and are explicable.

[76]            The reference to actions occurring during the COVID-19 lockdown relates to the late delivery of some orders, so that the Wilkinsons say stock was arriving after busy periods and so forth. Counsel for the Wilkinsons submits that payments made were applied to the oldest debt, so the fact that the invoices outstanding are the most recent invoices does not mean that the debt has not accumulated as a result of these factors.

[77]            In addition, Mr Wilkinson’s evidence is that Sheppard told them what sales they would have and the prices of bicycles and goods for those sales and that meant that they had to sell items at the mandated sale price, even if it was lower than the cost price.

[78]            Mr Te Paa disputes this saying “Sheppard did not mandate the retail price of its products and never has or would dictate a price at which a store must sell stock with each individual store having full discretion on the actual retail price”.

[79]            Mr Te Paa further deposes that at no time did Sheppard recommend a sale price below the cost price and that “national promotions are set based on market conditions and competitor activity, but even so, the stores can choose to participate in the promotions or do their own thing”. As this evidence was given in reply, the Wilkinsons have not had an opportunity to respond and Mr Te Paa’s evidence is essentially assertions with no real detail provided or documentary evidence in support substantiating this.

[80]            I note that the dealer agreements both contain a term at cl 8.1(1) that the dealer, being ABL, must:

participate in all promotional activities, gift card programs, and market research (as reasonably required by Sheppard Cycles New Zealand) at its cost and do all things necessary including signing all documentation, including both bank direct debt forms, to enable the Dealer’s proper and effective participation in such activities in the manner specified by [Sheppard]…

[81]            Mr Te Paa’s evidence that the stores could choose to participate in the promotions or not does not seem consistent with this clause. Furthermore, Mr Te Paa says that the promotional activities are at the cost of Sheppard but the agreement says they are at the cost of the Dealer.

[82]            In any event, the clause has a limit on Sheppard’s power in this regard, as participation is only “as reasonably required by Sheppard”. The parties’ evidence on this issue is clearly disputed. Whether Sheppard is in breach of the requirement to be reasonable is not a matter that can be determined in the context of this summary judgment application.

[83]            Another area in which the parties’ evidence is in dispute is on whether ABL was able to stock third party brands. Mr Wilkinson’s evidence is they could not but Mr Te Paa says in practice, Sheppard agreed to ABL stocking third party bicycles and parts and accessories and Sheppard had never declined a request to do so. Mr Te Paa’s

evidence is again a simple assertion in reply with no examples provided or documentary evidence in support.

[84]            Clause 3.2(1) of the First and Second Agreements provides that the Dealer must not stock and sell any Third Party Products without Sheppard’s prior written consent and expressly records that it may be withheld in Sheppard’s absolute discretion. Therefore it is possible Sheppard’s actions or inactions in this regard were consistent with the contract.

[85]            I acknowledge that several of the factors raised on behalf of the Wilkinsons appear to be matters that simply arise from the contract, such as the development (or lack of development) of the website and online ordering.

[86]               But there are number of other matters that appear to be inconsistent with the terms of the agreements, including that Sheppard treated obligations under the First and Second Agreements as one when they were separate agreements.

[87]            Another matter not addressed in reply on behalf of Sheppard is the failure to register a security interest in respect of goods provided to ABL pursuant to the First and Second Agreements. As a result, Sheppard was treated as an unsecured creditor in the liquidation. If Sheppard had registered a security interest, the Wilkinsons say it is likely that Sheppard would have been able to collect any unsold stock, and this would have reduced the amounts owing to ABL and in turn the amounts being sought against the defendants in these proceedings.

[88]In New Zealand Bloodstock Leasing Limited v Jenkins, the Court held:19

Equity recognises a duty owed by a creditor to guarantors to maintain security granted by the principal debtor for the debt. The security must be maintained so that it is available to be applied in reduction of that debt, and so the guarantor may exercise its right of subrogation to the security, if the guarantor makes payment of the principal debt. The equitable duty extends to a duty to perfect by registration any securities obtained from the principal debtor as security for the guaranteed debt (Wulff v Jay (1872) LR 7 QB 756 and Yorkshire Bank plc v Hall [1999] 1 All ER 879 at p 893).

19     New Zealand Bloodstock Leasing Ltd v Jenkins HC Auckland CIV-2004-404-5795, 19 April 2007 at [67].

[89]            As the Court went on to say “parties to a guarantee can, by contract, exclude the usual operation of the principles of suretyship, which absolve guarantors of liability if the creditor has released or through positive actions or through neglect impaired securities”, referring to Bank of New Zealand v Baker.20 The guarantee clause in the First and Second Agreements does not appear to protect the lender where it fails to register a security interest. It may therefore be arguable the guarantee may be impaired to the value of the goods that Sheppard would have otherwise been able to recover.

[90]            In an earlier decision involving Sheppard, where security interests must have been registered, the defence raised was whether Sheppard had properly accounted for the bicycles and other products that had been returned.21

[91]                As a substantive hearing will be necessary to determine whether the Trust provided a guarantee of the First Agreement and how the quantum ought to be divided between the two dealer agreements, it is appropriate for the defence based on the prevention principle also to be properly aired.

[92]            The Wilkinsons submit that the amounts they owe in total across all four agreements would have been reduced had Sheppard not taken the actions that it did, submitting the prevention principle defence ought to apply. I consider that this defence is reasonably arguable by a relatively fine margin in respect of the First and Second Dealer Agreements but do not consider it can be applied in respect of the amounts owing under the SAP and the Sublease.

[93]            I therefore enter summary judgment for the amounts owing under the SAP and the Sublease but decline summary judgment in respect of either the First (MYRIDE Botany) or the Second (MYRIDE Takapuna) Agreements.

20     At [68], referring to Bank of New Zealand v Baker (1926) NZLR 462 at 476 and 487.

21     Sheppard Cycles New Zealand Limited, v Ashton [2024] NZHC 2345 at [2]–[3].

Should summary judgment be entered on liability only?

[94]            Counsel for Sheppard indicated that if quantum could not be determined in respect of the First and Second Agreements, summary judgment could still be entered for liability with quantum to be determined.

[95]            Rule 12.3 of the High Court Rules 2016 expressly provides for the Court to give summary judgment on liability only if the party applying “satisfies the Court that the only issue to be tried is one about the amount claimed.”

[96]Fitzgerald J held in Fullarton v Arowana International Limited:22

For the Court to be satisfied that the only issue to be tried is one about the amount claimed is a reasonably high threshold. There must a “clear dichotomy” between issues affecting liability and damages. The rationale for this is self-evident. Like applications for split trials (between liability and damages), the Court is alive to the risk of inefficiency where there is overlap between the issues and evidence that will need to be considered for the purposes of liability and quantum/damages. …

[97]              As the above passage makes clear, splitting liability and quantum is only desirable where there is a clear dichotomy as often unforeseen issues can arise.

[98]            Sheppard has been on notice that there was a dispute as to quantum since the filing of the Wilkinsons’ affidavits, but it has not taken the opportunity to file comprehensive evidence on quantum in response. The analysis undertaken by Ms Wilkinson is based on invoices that were issued by Sheppard. In the circumstances of this case I do not consider that there is the required clear dichotomy between liability and quantum, particularly given the dispute between the parties as to whether the Botany and Takapuna businesses were run as one business and the view I have reached on the “prevention principle” defence. I decline therefore to grant summary judgment on a liability-only basis in respect of the First and Second Agreements.

22     Fullarton v Arowana International Limited [2021] NZHC 931 at [80] (footnotes omitted).

What are the appropriate terms of any order against the third named third defendant?

[99]It is not in dispute that:

(a)the role of the Independent Trustee, Ross Kennerley Trustee Limited, in relation to the Trust is as an independent trustee;

(b)the Independent Trustee is not and has never been a beneficiary of the Trust; and

(c)the Independent Trustee does not have (and has never had) any other rights or interest in respect of the Trust, other than as trustee.

[100]        Summary judgment is only being entered in respect of the SPA and the Sublease, so the trustee liability clauses in those two agreements are the only clauses that need to be considered.

[101]In the SPA, cl 16.0 provides:

16.1 If any person enters into this agreement as trustee of a trust, then: …

(2) If that person has no right to or interest in any assets of the trust except in that person’s capacity as a trustee of the trust, that person’s liability under this agreement will not be personal and unlimited but will be limited to the actual amount recoverable from the assets of the trust from time to time (“the limited amount”). If the right of that person to be indemnified from the trust assets has been lost, that person’s liability will become personal but limited to the extent of that part of the limited amount which cannot be recovered from any other person.

[102]In the Sublease, cl 6.1 provides:

6.1 Trustees: If any person enters into this sublease as trustee of a trust, then:

…

(2) Limitation: If that person has no right to or interest in any of the trust except in that person’s capacity as a trustee of the trust, that person’s liability under this sublease will not be personal and unlimited but will be limited to the actual amount recoverable from the assets of the trust from time to time (“the limited amount”). If the right of that person to be indemnified from the trust assets has been lost or impaired as a result of fraud or gross negligence that person’s liability will become personal but limited to the extent of that part of the limited amount which cannot be recovered from any other parties.

[103]        In Foundation Custodians Ltd v Thornton, where a similar clause was considered, White J held the natural and ordinary meaning of the phrase “not personal and unlimited” in that clause was to exclude both personal and unlimited liability for the trustee.23 Counsel for the Independent Trustee submits that the same approach should apply in this case.

[104]        In terms of the last sentence in both of the above clauses, extending an independent trustee’s liability where their right to be indemnified has been lost, the Independent Trustee submits that in this case, there is not (and cannot be) any allegation of breach of trust by the Independent Trustee. The Independent Trustee is therefore entitled to rely on the indemnity in clause 6(n) of the Trust Deed or an indemnity under s 81 of the Trusts Act 2019 in order to meet any liability to Sheppard from the Trust assets.

[105]        The plaintiff says in response that judgment should be entered in the terms in which it is recorded in the contracts because not only does this reflect the contractual language agreed to by all parties but the plaintiff has no visibility as to whether there have been any circumstances as to whether the right to indemnification has been lost and that this is a matter which may arise during enforcement steps. The plaintiff says its rights should not be limited to less than those agreed by the Independent Trustee.

[106]        I accept the plaintiff’s submissions and do not consider there is any basis for limiting the trustee’s liability as sought except to clarify that “lost” in this context means that the Independent Trustee has no right to rely upon their indemnity due to a breach of trust, as held in Foundation Custodians Ltd v Thornton.24 The fact that the assets of the trust are not (or may not be) sufficient to satisfy the liability does not mean that the trustee has “lost” the right to be indemnified.25

23     Foundation Custodians Ltd v Thornton (2009) 10 NZCPR 661 at [26]–[28] and [35].

24     Foundation Custodians Ltd v Thornton, above 23, at [32] – [33].

25     At [32] – [33].

Result

[107]        The plaintiff’s application for summary judgment is granted against all defendants in respect of the amount owing under the SAP of $165,048.38 (zero-rated for GST) and the amount owing under the Sublease of $12,885.96 with the Independent Trustee’s liability limited to the actual amount recoverable from the assets of the trust from time to time (Limited Amount) unless the Independent Trustees’ right to be indemnified from the Trust Assets has been lost (in that the Trustee has no right to rely upon their indemnity due to a breach of trust) when the Independent Trustee’s liability will become personal but limited to the extent of that part of the Limited Amount which cannot be covered from any other parties.

Costs

[108]        I ask the parties to confer on costs to try to each agreement. If agreement cannot be reached, memoranda may be filed of no more than three pages (excluding schedules) by the plaintiffs by 15 August 2025 and the defendants by 29 August 2025.

Associate Judge Sussock