Urquhart v Spanbild Holdings Limited - [2010] NZCA 435

IN THE COURT OF APPEAL OF NEW ZEALAND
CA30/2010
[2010] NZCA 435
BETWEENCRAIG ALEXANDER URQUHART

First Appellant
ANDDAVID JOHN MILLER

Second Appellant

ANDSPANBILD HOLDINGS LIMITED

Respondent

Hearing:16 September 2010

Court:Randerson, Rodney Hansen and Allan JJ
Counsel:R B Stewart QC and M C Smith for Appellants

G T Carter for Respondent

Judgment:23 September 2010 at 9.30 a.m.

JUDGMENT OF THE COURT

AThe application by the appellants for leave to adduce fresh evidence on appeal and to amend the grounds of opposition is dismissed.
BThe appeal is dismissed.
CThe appellants must pay to the respondent costs as for a standard appeal on a band A basis together with usual disbursements.

REASONS OF THE COURT
(Given by Randerson J)
Introduction
[1]        The parties to this appeal are the shareholders in a company named FINCO Holdings Limited (Finco). The company’s shareholding is:
Spanbild Holdings Ltd  50%
Messrs Urquhart & Miller as Trustees     45%
of the Halstaff Trust
Mr Urquhart    5%
100%

[2]        Messrs Urquhart and Miller were directors of the company along with a Mr Matheson and a Mr Waterfield representing Spanbild.
[3]        Finco had a loan facility from the ANZ Bank supported by personal guarantees from each of the shareholders. In mid-2008, Finco was in breach of certain of its banking covenants including a requirement for a 20 per cent effective equity ratio. Negotiations followed which resulted in the Bank offering a new loan facility on conditions which included Finco restoring its effective equity ratio. In the meantime, the Bank made a formal demand under the guarantees from Finco and each of the shareholders for repayment of the amount owing under the existing facility.
[4]        On 2 July 2008 Spanbild Holdings Ltd (Spanbild) provided funds of $1.218 million to Finco which were applied to meet the Bank’s requirements. This sum was sufficient to restore Finco’s equity ratio and to satisfy the Bank’s conditions precedent to the grant of the new loan facility.   The Bank then advised the guarantors it would take no further action under the guarantees at that stage.
[5]        Spanbild later sought summary judgment against the respondents for a contribution towards its payment to the Bank on a pro rata basis according to shareholding. Spanbild relied on clause 10.2 of a shareholders’ agreement entered into on 3 April 2006:
10.2       No guarantee: Subject to clause 10.3 below, no party shall be required to give any guarantee on behalf of the Company. If any of the parties make payment to any creditor of the Company under any guarantee or other obligation which that party may see fit to grant or undertake to assist the Company then the other parties will reimburse the party who has made the payment to the extent necessary to ensure that the parties’ contributions will be in the same proportions as the parties’ respective percentage Shareholding in the Company.

[6] The appellants’ defence to the claim was the payment was not made by Spanbild under its guarantee but was a shareholder’s loan to Finco. In a reserved decision…

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: [2010] NZCA 435
Decision Date: 23 September 2010

CaseChat Overview and Summary

This appeal concerns the interpretation of a shareholders' agreement and the validity of a claim for reimbursement by one party to the agreement. Spanbild Holdings Ltd (Spanbild) sought summary judgment against the appellants, Craig Alexander Urquhart and David John Miller, for reimbursement of their respective shares of a payment Spanbild made to the ANZ Bank. The appellants sought leave to adduce further evidence on appeal and to amend their grounds of opposition. The appeal was dismissed. Spanbild had provided a sum of money to the company, FINCO Holdings Limited, which was applied to meet the Bank's requirements. Spanbild then sought summary judgment against the appellants for a contribution towards its payment to the Bank on a pro rata basis according to shareholding. Spanbild relied on clause 10.2 of a shareholders' agreement entered into on 3 April 2006. The appellants' defence to the claim was that the payment was not made by Spanbild under the guarantee but was a shareholder's loan to the company. In a reserved decision delivered on 4 December 2009, the Associate Judge rejected the appellants' argument and entered summary judgment against the appellants. The issues on appeal were: (a) Whether the Associate Judge correctly characterised the payment made by Spanbild as a payment under the guarantee. (b) Whether the appellants' application for leave to adduce further evidence and to amend the grounds of appeal should be granted. (c) If so, whether there is an arguable defence available to the appellants. The Court found that the payment was properly characterised as a payment under the guarantee and dismissed the appeal. The Court also dismissed the application for leave to adduce further evidence and to amend the grounds of opposition because the evidence was not fresh, credible or cogent. The Court held that no exceptional circumstances had been made out which would justify the grant of leave to adduce further evidence or to amend the grounds of opposition.

Orders