Utatao v Bishop Warden Limited
[2019] NZHC 1633
•12 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2857
[2019] NZHC 1633
UNDER section 124 of the District Courts Act 2016 IN THE MATTER
of an appeal against the decision of His Honour, G M Harrison DCJ on 10 December 2018 (CIV-2018-004-000346; [2018] NZDC
25254)
BETWEEN
MATHEW KEITH UTATAO
Appellant
AND
BISHOP WARDEN LIMITED
Respondent
Hearing: 9 July 2019 Appearances:
P F Chambers for the Appellant N S Tabb for the Respondent
Judgment:
12 July 2019
JUDGMENT OF GORDON J
This judgment was delivered by me on 12 July 2019 at 3.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Henley-Smith Law, Auckland
N Tabb, Auckland
Counsel: P F Chambers, Auckland
UTATAO v BISHOP WARDEN LTD [2019] NZHC 1633 [12 July 2019]
Introduction
[1] This is an appeal by Mathew Utatao against a decision of Judge Harrison of the Auckland District Court granting an application for summary judgment against him in favour of the respondent, Bishop Warden Ltd (Bishop Warden).1
Background
[2] Mr Utatao was the sole director of MNC Group Ltd (in liquidation). He sought the professional consultancy services of Terra Group NZ Ltd, trading as Terra Consultants (Terra), in relation to a proposed subdivision of land at 156 Albany Highway, Auckland. The terms of the engagement are set out in a written contract (short form agreement) dated 3 February 2016 between MNC and Terra which was signed by Mr Utatao.
[3] This was followed by another request from Mr Utatao for Terra’s services in relation to a further proposed subdivision of land at 34 Finch Street, Western Springs. A second agreement in materially the same terms between MNC and Terra dated 25 July 2016 was signed by Mr Utatao.
[4] A third agreement between MNC and Terra also in relation to the Finch Street property dated 30 July 2016 was signed by Mr Utatao. This agreement was materially the same as the other two agreements.
[5] Terra undertook the work and rendered four invoices. Nothing was paid against the invoices.
[6] Bishop Warden says that, by written deed of assignment dated 1 November 2017, it purchased all legal and beneficial interest in the debts defined in the deed as:
All debts owning from MNC Group Limited and [sic] Matthew Utatao to the Assignor [Terra] as at 31 October 2017 for unpaid invoices of $28,459.19 plus all costs incurred in pursuing payment of unpaid invoices including interest (if any).
1 Bishop Warden Ltd v Utatao [2018] NZDC 25254.
[7] Bishop Warden sought summary judgment in the District Court against Mr Utatao for payment of the debt. Judge Harrison granted the application. Mr Utatao now appeals to this Court.
Approach on appeal
[8] Appeals are by way of rehearing.2 This does not mean that the court starts with a clean slate. It does, however, have to come to its own conclusion based on the material before the decision-maker.
[9] The appeal is to be determined by the court considering for itself the issues which were for determination at the original hearing.3 The Supreme Court commented that the appellate court must come to its own view on the merits:4
[16] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate Court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate Court’s opinion is different from the conclusion of the tribunal [or court] appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. …
Summary judgment principles
[10]Rule 12.2(1) of the High Court Rules 2016 provides that:
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 relevant principles are summarised in Krukziener v Hanover Finance Ltd
in the following terms:5
[26] The principles are well settled. 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: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). 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: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally
2 District Court Act 2016, s 127; and High Court Rules 2016, r 20.18.
3 See Pratt v Wanganui Education Board [1977] 1 NZLR 476 (SC).
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
5 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.
resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[12] In Gardner v Gardner, Associate Judge Osborne (as he then was) helpfully summarised the general principles of summary judgment.6 These include:
(a)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to determine and reject spurious defences or plainly contrived factual conflict. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(b)In assessing a defence, the Court will look for appropriate particulars and a reasonable level of detailed substantiation — the defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.
(c)In weighing these matters, the Court will take a robust approach and enter judgment even when there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
Grounds of appeal
[13] Mr Utatao says he has legitimate defences to Bishop Warden’s claim. He raises a number grounds of appeal. These can be summarised under two main headings: (a) the capacity in which Mr Utatao signed the three contracts and (b) the assignment of the debt. Mr Utatao relies on three further discrete grounds which I will address after a discussion of the two main grounds.
6 Gardner v Gardner [2015] NZHC 2018 at [20].
First ground: Capacity in which Mr Utatao signed the contracts
[14] The key issue under this heading is whether Mr Utatao signed the three contracts in a dual capacity, including as a guarantor.
[15] A document does not have to be signed twice, once on behalf of the company and again in a personal capacity. If a person signs a document in a dual capacity the company will be bound as well as the individual personally.7 The signatory’s intention is generally irrelevant; the meaning is to be determined objectively.8 Mr Utatao accepts that a party may sign a contract in a dual capacity. But he says that this is not the case here.
[16] I start with an examination of the contracts. Each is only one page with two pages of conditions attached.
3 February 2016 contract
[17]At the top of the first page there is the following:
Between: MNC Group Ltd
Terra Group NZ Ltd – “Terra Consultants”
(Consultant)
Client Representative: Principal Shareholder Or Managing Director: Guarantor Person
Responsible for Making Payment:
Mathew Utatao
Lime Construction Ltd
Address:
Bus Ph:
Mob Ph: [number inserted] Email:
[18]At the bottom of the first page there is the following:
7 Young v Schuler (1883) 11 QBD 651 (CA); and Elpis Maritime Co Ltd v Marti Chartering Co Inc
[1992] 1 AC 21 (HL) at 28–31.
8 Doughty-Pratt Group Ltd v Perry Castle [1995] 2 NZLR 398 (CA) at 403–404.
[19]Mr Utatao has signed once over the top of his printed name.
25 July 2016 contract
[20]At the top of the first page there is the following:
Between: MNC Group Ltd
Terra Group NZ Ltd – “Terra Consultants”
(Consultant)
Client Representative; Principal Shareholder Or Managing Director; Guarantor/Person
Responsible for Making Payment:
Mathew Utatao MNC Group Ltd
37 Martin Ave Mt Albert
Address Or Registered Office:
Office Ph:
Mob Ph: [number inserted] Email:
[21]At the bottom of the first page there is the following:
[22]Mr Utatao has signed once over the top of his printed name.
30 July 2016 Contract
[23]At the top of the first page there is the following:
Between: MNC Group Ltd
Terra Group NZ Ltd – “Terra Consultants”
(Consultant)
Client Representative: Principal Shareholder Or Managing Director: Guarantor/Person
Responsible for Making Payment: Attention: Mathew Utatao
MNC Group Ltd Mt Albert
Auckland, 1025
Address or Registered Office:
Office Ph:
Mob Ph: [number and email address Email: inserted]
[24]At the bottom of the first page there is the following:
[25]Mr Utatao has signed once over the top of his printed name.
[26] Mr Chambers, for Mr Utatao, first says that ordinarily one signature suggests that the party is signing in one capacity only. Addressing that submission, I first note that, as is apparent from the above, Mr Utatao signed under the sub-heading on each of the three contracts without any modification. He did not, for example, cross-out or circle a particular capacity within the sub-heading. The present case is distinguishable from Vuletic v Contributory Mortgage Nominees Ltd.9 In that case, Ms Vuletic wrote the word “director” under her name, qualifying her signature. Also, the court in that case considered that the contract there was drafted in such a way that the drafter did not expect Ms Vuletic to be a party. The Court observed that those drafting the agreement appear to have contemplated that Mrs Vuletic’s guarantee would be provided in a separate document or at least by separate endorsement by her on the sale agreement.10
[27] To the contrary, in the present case, the terms of the short form agreement expressly refer to the guarantor’s obligations under cls 8 to 8.3. They provide:
8.The Guarantor covenants with the Consultant that in consideration of the Consultant agreeing to perform the services relating to the project at the request of the Guarantor that the Guarantor guarantees payment of all moneys due by the client to the Consultant and the performance by the client of the obligations recorded in this agreement.
8.1No release, delay or other indulgence given by the Consultant to the client or the clients successors or assigns or any other thing whereby the Guarantor would have been released had the Guarantor been merely a surety shall release, prejudge or affect the liability of the Guarantor as a Guarantor or as indemnifier.
9 Vuletic v Contributory Mortgage Nominees Ltd CA250/05, 31 July 2006.
10 At [15].
8.2As between the Guarantor and the Consultant the Guarantor may for all purposes be treated as the client and the Consultant shall be under no obligation to take proceedings against the client before taking proceedings against the Guarantor.
8.3Should there be more than one Guarantor their liability under this Guarantee shall be joint and several.
[28] I also refer to McCarthy v Derbyshire11 where Keane J referred with approval to the following statement by Gallen J in Chiswick Investments v Pevats12 as follows:
… looking at the document as a whole it seems to me that the most likely construction would have to be that the respondent did sign it in a dual capacity as did the principal shareholder and is therefore on the face of it bound as a guarantor. That interpretation has the advantage that the whole of the document is given meaning and no part becomes mere surplusage.
[29] In this case, were the Court to accept Mr Utatao’s submission, the word “guarantor” above the signatures and cls 8 to 8.3 would become “mere surplusage”.
[30] Secondly, Mr Chambers says that the sub-headed capacities are differentiated by the disjunctive conjunction “or”, indicating that not all of the listed capacities applied. But that is not in fact the case. As reproduced above, the sub-heading only uses “or” in relation to the second class of capacity “Principal Shareholder Or Managing Director”; it does not disjoin the guarantor from other listed capacities.
[31] Mr Chambers further submits that the ability to sign in a dual capacity is only clear in law where there is a clear delineation in the contract that the signatory signs in two capacities. I am satisfied on an objective basis that it is clear from the sub- heading as well as the associated terms of the agreement that Mr Utatao signed in a dual capacity, including as a guarantor.
[32] Thirdly, Mr Chambers says Terra never explained to Mr Utatao the capacity in which he was signing or the effect of what he was signing. Mr Chambers takes issue with the Judge’s rejection of Mr Utatao’s claim that he was not aware that he was signing a guarantee. The Judge referred to Mr Utatao being a businessman of some experience and having dealt with the Terra Group previously.13 Mr Chambers submits
11 McCarthy v Derbyshire HC Auckland, CIV-2005-004-003105, 6 December 2005 at [35].
12 Chiswick Investments v Pevats [1990] 1 NZLR 169 (HC) at 174.
13 Bishop Warden Ltd v Utatao, above n 1, at [25].
that a businessman would not sign a document binding him as guarantor unless the wording was clear in the contract that dual capacity was the result. But, as is apparent, the word “guarantor” clearly appears above Mr Utatao’s signature on all contracts, and the wording of clauses 8 to 8.3 is plain.
[33] Mr Chambers also takes issue with the Judge’s observation that as far as he was aware, where parties are essentially in an equal bargaining position there is no obligation on one party to give an explanation to the other contracting party of the meaning and effect of the contract.
[34] Mr Chambers submits that signing in a dual capacity has nothing to do with the equality of the parties, rather it is concerned with avoiding mistake or misrepresentation. I agree with Judge Harrison: there is no legal requirement that a personal guarantee must be specifically pointed out by the other contracting party. Signatories are taken to have read the documents they sign and even if they elect not to read them, they are still bound by the terms. As discussed above, it is evident from both the sub-heading under which Mr Utatao signed and from the terms of the agreements, namely cls 8 to 8.3, that the agreements contained a personal guarantee.
[35] For these reasons, I am satisfied that Judge Harrison did not err in finding that Mr Utatao signed in a dual capacity, including as a personal guarantor.
[36] Finally, I note the submission of Ms Tabb, for Bishop Warden, that Mr Utatao is also liable for payment as a result of the wording of cl 4 in the conditions annexed to each of the three agreements. That clause provides:
4.The Client shall pay the Consultant for the Services the amount of fees and expenses at the times and in the manner set out in the attached documents. Where this Agreement has been entered into by an Agent (or a person purporting to act as Agent) on behalf of the Client, the Agent and Client shall be jointly and severally liable for payment of all accounts due to the Consultant under this Agreement.
[37] Ms Tabb submits that this clause rebuts the standard position that an agent signing on behalf of a disclosed principal is not personally liable. She submits that even if Mr Utatao only signed the contract on behalf of, or as agent for, MNC, he is still personally responsible to pay the invoices. This was not an issue determined by
Judge Harrison. It is also not necessary for this Court to do so, having regard to my decision that Mr Utatao signed each of the three contracts in a dual capacity. That is sufficient to dispose of the argument as to Mr Utatao’s liability under the three contracts.
Second ground: Assignment of the debt
[38] Mr Chambers, for Mr Utatao, makes two submissions under this heading. First, he submits the Judge erred in finding that “the plaintiff [Bishop Warden] purchased all the legal and beneficial interests in debts owing as at 1 November 2017”14 as there was little evidence presented other than the deed of assignment. Secondly, Mr Chambers submits that the Judge further erred in finding that s 50 of the Property Law Act 2007 (PLA) excluded all possible argument that the assignment is a bare assignment15 and therefore illegal.
[39] At law a debt can be assigned. Section 50 of the PLA provides for assignment of choses in action. Mr Utatao does not appear to dispute this.
[40] As to Mr Utatao’s first point, I am satisfied the deed of assignment is sufficient evidence of assignment of the debt from Terra to Bishop Warden, particularly in the absence of contrary evidence. The deed of 1 November 2017 provides:
ASSIGNMENT
1.In consideration for the payment of $10.000 made by the Assignee, the Assignor hereby assigns to the Assignee absolutely, and the Assignee takes assignment of, all of the Assignor’s right, title and interest in the Debt with effect from the date of this Deed.
…
[41] The Assignee is defined as Bishop Warden Ltd and the Assignor is Terra Group. As noted in [6] above, the deed further defines Debt as meaning “all debts owing from MNC Group Limited and Matthew Utatao to the Assignor as at 31 October 2017 for unpaid invoices …”. It is clear from this that there appears to be assignment of the debt in fact.
14 At [2].
15 At [27]–[31].
[42] For summary judgment, where there is sufficient evidence raised by the plaintiff (Bishop Warden) to show there is no defence, the defendant (Mr Utatao) must respond if the application is to be defeated.16 Upon adducing the deed of assignment, the onus shifted to Mr Utatao to provide contrary evidence in response. He has failed to do so. Accordingly, the Judge did not err in his finding on this issue.
[43] I turn to the second submission, that the assignment is a bare assignment. A bare assignment assigns to the assignee the bare right to sue on the debt but does not assign the debt itself or all rights arising under the contract pursuant to which the debt is incurred. Such assignments are illegal by way of public policy. As discussed above, the Debt is defined as “all debts owing”. In other words, it is the debt (not just a right to sue on the debt) that has been assigned by the terms of the deed.
[44]As the Supreme Court recently commented:17
[78] … assignment of a debt even in circumstances where it is foreseen that litigation will be necessary in order to recover the debt is not problematic.
… The assignment of a thing in action (defined as “a right to receive payment of a debt”) is specifically provided for in s 50 of the Property Law Act …
[45] Mr Chambers makes three points in support of his submission that the assignment is bare. First, he says that the Assignor’s rights have been abrogated by the liquidator’s clawback powers under the Companies Act 1993. The invoices on which the debts are based are voidable insolvent transactions under s 292 and therefore the assignment of that debt is bare (and unenforceable).
[46] However, whether or not that is so in relation to MNC, Mr Utatao’s contractual obligations as a guarantor are independent of those owed by MNC. The winding up of the debtor company does not release the guarantor unless the provisions of the guarantee say otherwise.18 The guarantee in this case has no such provision. Bishop Warden cannot recover twice, but the whole purpose of a personal guarantee is to obtain payment from another party when the principal debtor cannot or will not pay.
16 Krukziener v Hanover Finance Ltd, above n 5, at [26].
17 PricewaterhouseCoopers v Walker [2017] NZSC 151, [2018] 1 NZLR 735 (footnotes omitted).
18 Company Law (online ed, Thomson Reuters) at [CA292.08].
[47] Secondly, Mr Chambers says that, in circumstances involving the liquidation of a company, the right to assign must be an express term of the short form agreement. Absent such an express term, as is here, any assignment will be bare.
[48] Mr Utatao bears the onus of satisfying the appeal court that it should differ from the decision under appeal. However, Mr Chambers has not provided any authority for this alleged proposition of law (or any principled reasons why this should be the case). I am not satisfied that an express right to assign is required.
[49] Finally, Mr Chambers submits that the assignment is invalid because the debtor (MNC) or more particularly the liquidator of MNC was never given actual notice of the assignment. However, the giving of (or the failure to give) notice does not determine the validity of a statutory assignment.19 In any event, the proceedings are against the guarantor, Mr Utatao, to whom notice of the assignment was given. Mr Utatao accepts that “Notice was arguably given to the appellant [himself]”. Therefore, the assignment is valid, at least vis-à-vis Mr Utatao, against whom the present proceeding is brought.
[50] For these reasons, I am satisfied that Judge Harrison did not err in finding that the debt had been assigned and in rejecting the submission on behalf of Mr Utatao that the assignment was a bare assignment and therefore illegal and unenforceable.
Three further grounds
[51] Mr Utatao raises three further grounds in his notice of appeal, each of which can be considered relatively briefly.
Summary of background
[52] Mr Utatao takes issue with the following statement by Judge Harrison in the part of his decision setting out the background:
[4] On or about 3 February 2016 and again on 30 July 2016 Mr Utatao signed Terra Group’s short form agreement for consultant engagement as a director of MNC Group Limited and also allegedly as a personal guarantor.
19 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 669.
[53] Mr Chambers submits the allegation of signing as a guarantor has no bearing on the background summary. Mr Chambers submits that in reverting to the allegation, rather than completing the summary of the short form agreement in the background to the case, Judge Harrison misdirected himself from the outset as to the interpretation of the contract.
[54]There is nothing in this point. There is no need to say anything further.
Section 27 of the Property Law Act 2007
[55]Mr Chambers submits Judge Harrison erred in fact and law when he stated:
[32] Section 27 of the [Property Law] Act also requires contracts of guarantee to be in writing. That is plainly the case here and Mr Utatao has not denied that he has signed both documents. He says he is not bound by them for the reasons discussed.
[56] Mr Chambers submits that Mr Utatao has denied he signed as a guarantor. That claim was plainly recognised by the Judge in the paragraph complained of. There is nothing in this point.
Fair Trading Act 1986
[57] Mr Utatao submits that Judge Harrison erred in holding that ss 46L and 46M(h) of the Fair Trading Act 1986 (FTA) have no relevance to the present case. The Judge reasoned that s 46L related to circumstances when a term in a consumer contract is unfair and that Mr Utatao is not a consumer as defined by that Act.
[58] The FTA defines a “consumer contract” in relation to goods or services as a contract between at least one supplier supplying the goods or services in trade and a consumer.20 The Act defines a “consumer” as a person who:
acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; …
[59] I agree with Judge Harrison, that the services acquired from Terra were not of a kind ordinarily required for personal, domestic or household use. In any event, even
20 Fair Trading Act 1986, s 2.
if the provisions could apply in this case, I am not satisfied that a personal guarantee is an unfair contract term in terms of ss 46L and 46M. Such terms are common in contracts with companies.
Result
[60]For the reasons set out above, I dismiss the appeal.
Costs
[61] I reserve costs. My preliminary view is that the respondent is entitled to costs on a 2B basis. If the parties are able to agree costs they are to file a joint memorandum within 15 working days of the date of this judgment. In the event that agreement cannot be reached, the respondent may file a memorandum within five working days of the date for the joint memorandum. The appellant is to file his memorandum within a further five working days. Memoranda should not exceed four pages.
Gordon J
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