Sovereign Services Limited v McEwen - [2013] NZHC 2892

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2667 [2013] NZHC 2892

UNDER Part 12 of the High Court Rules

IN THE MATTER

of an application for summary judgment

BETWEEN

SOVEREIGN SERVICES LIMITED Plaintiff

AND

DAVID ANDREW McEWEN Defendant

Hearing: 15 October 2013

Counsel:

J C Caird and T K Cunningham-Adams for Plaintiff
N A Farrands for Defendant

Judgment:

1 November 2013

JUDGMENT OF GODDARD J

This judgment was delivered by me on 1 November 2013 at 3.00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Simpson Grierson, Auckland for Plaintiff
Morrison Kent, Auckland for Defendant

SOVEREIGN SERVICES LIMITED v McEWEN [2013] NZHC 2892 [1 November 2013]

[1] Sovereign Services Limited (Sovereign) seeks summary judgment against Mr McEwen in the following terms for amounts due under a guarantee and indemnity dated 6 May 2002:

(a) the debit balance in commission account (Company Account) plus interest at the fringe benefit rate of 5.9 per cent per annum until the date of payment;

(b)the debit balance in commission account (Associate Account) plus interest at the fringe benefit rate of 5.9 per cent per annum until the date of payment;

(c) interest on the guaranteed indebtedness, being the total sum owed by Mr McEwen under the guarantee, at the rate of 10 per cent per annum until the date of payment; and

(d) costs on a solicitor/client basis and disbursements.

Background facts

[2] Sovereign provides financial services which include insurance and home loans. These services are sold through independent contractors known as financial advisers.

[3] In 2002, Sovereign appointed McEwen Financial Services Limited (the Company) as an independent contractor to sell Sovereign’s home loan, investment, and insurance services. The terms of the Company’s appointment with Sovereign were set out in a Distribution Financial Adviser Agreement dated 6 May 2002 (the Principal Agreement). Under the Principal Agreement, Sovereign set up a commission account in the Company’s name. Any commission earned by the Company on the financial services it sold was credited to the Company Account. Under the Principal Agreement, Sovereign required a personal guarantee, which in the Company’s case was provided by Mr McEwen as its director.

[4] The operative clauses of the Principal Agreement for the purposes of this proceeding are set out in the following paragraphs.

[5] Clause 16 provided as follows:

16. Commission

we can change the terms and rates of any of the Schedules (excluding the Schedule of Split Arrangements) at any time on written notice to you. See clause 40;

we can debit your Commission Account in accordance with the Schedules of Commission Debits and with any other amounts you owe us (whether under this Agreement or otherwise);

we have the right to charge interest at the Fringe Benefit Interest Rate calculated on a daily basis from time to time on any debit balance in your Commission Account;

to immediately pay to us any debit balance in your Commission
Account if we request you to do so in writing;

if

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: [2013] NZHC 2892
Decision Date: 1 November 2013

CaseChat Overview and Summary

Sovereign Services Limited brought an application for summary judgment against David Andrew McEwen. The application sought payment under a guarantee and indemnity signed by McEwen as surety for his company, McEwen Financial Services Limited. The dispute arose from fraudulent conduct by Mr Eric Chuah, an associate of the company, who submitted false insurance applications. Sovereign claimed that McEwen was liable under the guarantee and indemnity for the sums owed by the company and Chuah, including interest and costs. McEwen opposed the application on several grounds, including that the guarantee did not cover fraud by a third party, and that there was an implied term that Sovereign would take reasonable steps to vet insurance applications by associates. The court considered the terms of the guarantee and indemnity, which were clear and unambiguous, and found that the guarantee covered losses caused by fraud. The court also rejected the argument for an implied term and equitable set-off, finding that the guarantee's terms were specific and did not permit the importation of extraneous terms. The court concluded that there was no defence to the claim and that the quantum of the claim was clear. Summary judgment was entered against McEwen for the full amount claimed by Sovereign, including interest and costs.

Orders