Shoye Venture Limited v Wilson - [2014] NZHC 408

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-7912 [2014] NZHC 408

BETWEEN SHOYE VENTURE LIMITED Plaintiff

ANDDONALD GORDON WILSON Defendant

Hearing: 12 December 2013

Counsel: M R T Colthart for Plaintiff
A E Hansen for Defendant

Judgment: 7 March 2014

JUDGMENT OF RODNEY HANSEN J

This judgment was delivered by me on 7 March 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors: Warren Simpson & Co, Papakura
Heimsath Alexander, Auckland

SHOYE VENTURE LIMITED v WILSON [2014] NZHC 408 [7 March 2014]

Introduction

[1] The plaintiff (Shoye) sues to enforce a guarantee entered into by the defendant (Mr Wilson) of the obligations of Tania Mara under a management agreement between Shoye and Ms Mara. The management agreement related to a gambling operation carried on by Shoye and Manukau Golf Club Limited (Manukau) in premises leased by Shoye known as the Trophy Bar. In related
proceedings1 Duffy J held the gambling operation to be in breach of the Gambling

Act 2003 and the related contracts to be illegal.

[2] Mr Wilson applies to strike out the claim on the ground that the guarantee is itself illegal and there is no prospect that a Court would exercise its discretion under s 7 of the Illegal Contracts Act 1970 (the Act) to relieve Shoye from the consequences of its illegality. The application is resisted by Shoye who does not accept that the guarantee is illegal or, if it is, that relief would not be available under the Gambling Act.

Further background

[3] The gambling enterprise was conducted pursuant to two agreements dated

10 September 2007, a venue agreement made between Shoye and Manukau, and the management agreement between Shoye and Ms Mara. Those agreements were never approved by Secretary for Internal Affairs as required under the Act. Instead, a later agreement dated 9 October 2007 between Manukau and Shoye was approved as the basis for the gambling enterprise. Duffy J held that the parties had implicitly abandoned the later agreement by not performing it in accordance with its terms. As the September agreements, pursuant to which the gambling enterprise was conducted, had not been approved, the operation was illegal and, pursuant to s 14(1) of the Act, the contracts are illegal for the purposes of the Act.

[4] Shoye issued this proceeding against Mr Wilson to enforce his guarantee of

Ms Mara’s obligation. The guarantee provides:

1. GUARANTEE

1 Manukau Golf Club Inc v Shoye Venture Ltd [2013] NZHC 658.

1.1 Unconditional Guarantee and Indemnity

In consideration of the Business Owner [Shoye] agreeing to enter into the Management Agreement the Guarantor [Mr Wilson] unconditionally and irrevocably:

1.1.1guarantees by way of continuing obligation to the Business Owner [Shoye], and not merely as a surety, the due performance by the Manager and of all its obligations under the Management Agreement; and

1.1.2indemnifies the Business Owner [Shoye] against any loss or damage which it may suffer as a direct or indirect result of the…

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.

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Details

Case: [2014] NZHC 408
Decision Date: 7 March 2014

CaseChat Overview and Summary

In Shoye Venture Limited v Wilson, Shoye, the plaintiff, sought to enforce a guarantee made by the defendant, Mr Wilson, in relation to a management agreement between Shoye and Tania Mara. The management agreement pertained to a gambling operation conducted by Shoye and Manukau Golf Club Limited in the Trophy Bar premises, leased by Shoye. The legality of the gambling operation was previously adjudicated in related proceedings where Duffy J found the operation to be illegal under the Gambling Act 2003. Mr Wilson sought to strike out the claim on the basis that the guarantee was itself illegal and that there was no prospect of the court exercising its discretion under section 7 of the Illegal Contracts Act 1970 to grant relief.

The court was required to determine whether the guarantee was illegal and, if so, whether relief could be granted under section 7 of the Illegal Contracts Act. Mr Wilson argued that the guarantee must be considered illegal because it related to an illegal gambling operation, and relief under section 7 would not be appropriate given the specific provisions of the Gambling Act. Shoye, on the other hand, argued that the guarantee was not illegal and that relief under section 7 should be considered.

The court found that even if the management contract was deemed illegal, it did not automatically render the guarantee illegal. The court needed to consider whether the guarantee was sufficiently related to the primary contract and whether Mr Wilson knew or should have known of the essential facts giving rise to the illegality. While the court recognised that the illegal nature of the gambling operation might weigh against granting relief, it could not exclude the possibility that other factors might permit enforcement of the guarantee. The court dismissed Mr Wilson's application to strike out the statement of claim, allowing Shoye to pursue its claim, subject to costs on a category 2 band B basis.

Orders