Westpac New Zealand Limited v Chahil HC Auckland CIV-2011-404-1612
[2011] NZHC 996
•22 August 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-1612
BETWEEN WESTPAC NEW ZEALAND LIMITED Plaintiff
ANDRUPINDER SINGH CHAHIL First Defendant
ANDJASWANT SINGH CHAHIL Second Defendant
ANDRUPINDER SINGH CHAHIL AND JASWANT SINGH AS TRUSTEES OF THE CG TRUST
Third Defendants
ANDRUPINDER SINGH CHAHIL AND JASWANT SINGH CHAHIL AS TRUSTEES OF THE CHAHIL FAMILY TRUST
Fourth Defendants
ANDRUPINDER SINGH CHAHIL AND JASWANT SINGH CHAHIL AS TRUSTEES OF THE GURLIEM FAMILY TRUST
Fifth Defendants
Hearing: 22 August 2011
Appearances: S Gollin for the Plaintiff
M Tolhurst for the Second Defendant
Judgment: 22 August 2011
ORAL JUDGMENT OF PETERS J
Solicitors/Counsel
Minter Ellison Rudd Watts, Lawyers, Auckland (email: mailto:[email protected]) City Law, Solicitors, Auckland (email: [email protected])
WESTPAC NEW ZEALAND LIMITED V CHAHIL & ORS HC AK CIV-2011-404-1612 22 August 2011
[1] The plaintiff, Westpac New Zealand Limited (“Westpac”), seeks summary
judgment against the second defendant. Judgment is sought for the sum of
$14,985,867.90 (“principal sum”) together with interest at different rates in respect of different portions of the sum outstanding.
[2] Westpac’s claim against the second defendant arises from a Deed of Guarantee dated 16 November 2007 (“guarantee”). The issue which arises is whether the second defendant is bound by the terms of the guarantee in his personal capacity.
Principles applicable to an application for summary judgment
[3] The legal principles applying to an application for summary judgment were expressed by the Court of Appeal in Krukziener v Hanover Finance Ltd:[1]
[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
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 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).
[4] While the onus is on the plaintiff, the defendant will need to provide some evidential foundation for any defence raised: Australian Guarantee Corporation
(NZ) Ltd v McBeth.[2]
[2] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 59.
[5] The background to this dispute which appears from the affidavit evidence which has been filed is as follows.
[6] In May 2007, Westpac advanced funds to:
(a) the first and second defendants as trustees of the CG Trust, the Chahil
Family Trust and the Gurliem Family Trust (“trusts”); and
(b) C.G. Investments Limited (“CG Investments”).
[7] It appears from an extract from a company search that the first and second defendants jointly owned the shares in CG Investments, so presumably they held them as trustees. The first defendant was the sole director of CG Investments. CG Investments appears to have been one of several companies associated with the first defendant and I understand from the evidence that these companies undertook various property developments.
[8] On about 24 September 2007 Westpac agreed to advance further funds. Some of the advance seems to have been “new” money, the balance being a sum required to refinance existing borrowings. Westpac’s loan offer in relation to the borrowing is dated 24 September 2007 and is addressed to the director of CG Investments. The loan offer records that Westpac was to advance $1,710,000.00 to CG Investments and to advance $16,234,000.00 to the first defendant, the CG Trust and the Chahil Trust.
[9] It was a term of Westpac’s loan offer that various securities were to be provided, including an “all obligations interlocking deed of guarantee and indemnity” from the first defendant, CG Investments and other companies, the trusts and the second defendant.
[10] The documents required in respect of the loans were executed on
16 November 2007 and include the guarantee on which the case turns.
Rupinder Singh Chahil, Jaswant Singh Chahil, The Chahil Family Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees), the C G Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees), The Gurliem Family Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees), RSG Investments Limited ... [and various other companies, including CG Investments].
[12] Clause 3 of the guarantee reads as follows:
You must pay the Guaranteed Money whenever the Secured Parties make a written demand on you. The Secured Parties may make any number of demands, each of which may be for payment of all or part of the Guaranteed Money at the time the demand is made.
[13] The definition of Guaranteed Money is “all money which the Customer (whether alone or with one or more others) may owe to the Secured Parties now or in the future for any reason”.
[14] The Customers are named in the guarantee as:
Rupinder Singh Chahil, Jaswant Singh Chahil, The Chahil Family Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees), the C G Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees), The Gurlien [sic] Family Trust (Rupinder Singh Chahil and Jaswant Singh Chahil as trustees) RSG Investments Limited ... [and various other companies, including CG Investments].
[15] Westpac is the Secured Party. There is no dispute that the money Westpac seeks to recover is Guaranteed Money.
[16] The second defendant executed the guarantee on four different pages, including three pages on which it is clear that the second defendant is being required to execute the guarantee in his capacity as a trustee, being one page for each of the trusts. On each execution page there is a solicitor’s certificate given by a Mr R V M Allen. In the certificate the solicitor certifies that he has explained to the guarantor the “general nature and effect” of the guarantee and that the guarantor has stated to the solicitor that the guarantor understands “the general nature and effect” of the guarantee and “the obligations and risks involved”.
[17] There is no evidence as to Westpac’s instructions to Mr Allen and no affidavit
from Mr Allen.
[18] In February 2008 CG Investments sought an increase in its facilities. Westpac agreed to advance the additional funds, subject to all guarantors agreeing to the increased borrowings. The second defendant executed a document confirming his agreement to the increase.
[19] CG Investments defaulted under the terms of the loan agreement on
16 November 2009. Westpac made demand of CG Investments on 18 December
2009. CG Investments did not pay the sum demanded.
[20] Westpac has made some recoveries but the principal sum and interest remains outstanding. Westpac has made demand of the second defendant, most recently on
8 February 2011.
Submissions
[21] Westpac’s case is that the second defendant is liable personally under the guarantee and, accordingly, that the second defendant is liable to repay all sums due under the guarantee.
[22] The second defendant contends that Westpac should not have summary judgment because the second defendant has a defence in two respects.
[23] The first defence concerns the question of whether the second defendant is bound personally by the terms of the guarantee and, if so, the effect of clause 34 of the guarantee.
[24] The second is an allegation that the taking of the guarantee and seeking judgment under its terms was/is unconscionable, sufficient to discharge the second defendant from liability.
[25] Turning to the first defence, Westpac contends it is clear from the face of the guarantee that the second defendant executed the guarantee in his personal capacity
as well as a trustee, and that he is bound accordingly. The second defendant is identified as a guarantor, first without qualification and then quite separately as a trustee of each of the trusts.
[26] Westpac also submits that, if there could have been any doubt about that in the mind of the second defendant, it would have been removed by the fact that the second defendant was required to execute the guarantee on four different pages and the fact that the solicitor must be taken to have explained the general nature and effect of the guarantee, given the certificate which the solicitor gave.
[27] The second defendant’s response to this submission is that it is not clear on the face of the guarantee that the second defendant committed himself personally to be bound by the terms of the guarantee and that, if Westpac sought to achieve that result, it was obliged to make the position much clearer to the second defendant than it did. There is no evidence that Westpac communicated with the second defendant in any way or obtained any statement of assets and liabilities from him, so as to put the second defendant on notice that he was being asked to guarantee the borrowings personally.
[28] In addition, counsel for the second defendant refers to clause 34 of the guarantee which reads as follows:
This clause only applies if you are a trustee and sign this document as trustee of that trust.
This document will bind you as trustee of that trust. It will also bind you personally unless you are an independent trustee.
You confirm:
the terms of the trust document give you the power to enter into this document;
you have properly signed this document in accordance with the terms of the trust;
you have and will retain a right of indemnity from the trust assets.
The above are warranties, which means that the Secured Parties can sue you if any are incorrect.
The Secured Parties may recover the Guaranteed Money and any other amounts owing under this document from the assets of the trust and for this purpose may exercise your rights to be reimbursed from those assets or from any other person (such as a beneficiary of the trust).
The Secured Parties rights against you will be limited only if you are an independent trustee. In that case, the Secured Parties will only be entitled to recover Guaranteed Money and any other amounts owing under this document from any of your personal assets if they are not able to recover the Guaranteed Money and any other amounts owing under this document from the trust assets because the warranties you gave above were incorrect. The Secured Parties will only be entitled to recover from your personal assets the amount they would have recovered from the trust assets had those warranties been correct. ...
You are an independent trustee for the purpose of this clause unless you have any right to or interest in any of the assets of the trust except in your capacity as a trustee of the Trust.
For example, if you are a beneficiary of the trust then you are not an independent trustee.
(original emphasis)
[29] The second defendant’s case is that he falls within clause 34 and that his liability is limited to the assets of the trusts. The second defendant is a trustee, he has signed the guarantee as a trustee, he considers he is an independent trustee and his case is that none of the warranties referred to in clause 34 are incorrect. Accordingly, the second defendant contends that any liability he has under the guarantee is limited to the assets of the trusts.
[30] In so far as concerns the factual elements on which this submission is based, there is no argument that the second defendant did execute the guarantee as trustee, that none of the warranties were incorrect and that the second defendant is an independent trustee in respect of C G Trust and the Gurliem Trust. The only issue which might arise as to the second defendant’s independence is in respect of the Chahil Family Trust. The discretionary beneficiaries of that trust include the settlor’s “parents”. The settlor is the first defendant. An issue arises as to whether the second defendant is a “parent” of the settlor because, although the second defendant is the natural father of the first defendant, the first defendant was adopted by others many years ago. Accordingly, there is room for argument on the terms of the trust deed as to whether the second defendant is a beneficiary of the Chahil Family Trust.
[31] Westpac’s submission on clause 34 is to focus on the first sentence of the clause. Counsel for Westpac submits that it is quite clear from this sentence that clause 34 does not speak to the situation where a guarantor has signed both personally and as a trustee.
[32] The second defence on which the second defendant relies is that the taking of the guarantee and Westpac’s actions to enforce the guarantee are unconscionable. On the evidence before the Court, it does not appear that the second defendant would or could have benefited from the ventures for which the financing was required. The second defendant is in his late sixties, is a superannuitant and was or is a sickness beneficiary.
[33] Counsel for the second defendant accepted, however, that the second defendant was free to decline to give the guarantee. There is no suggestion that Westpac, or anyone else for that matter, applied pressure to the second defendant so that he executed the guarantee under duress. There is no evidence before the Court to suggest that there was anything unconscionable in Westpac seeking the guarantee or that it is acting unconscionably in seeking to enforce the guarantee, if indeed its terms bind the second defendant.
[34] There is no evidential foundation for this second alleged defence.
Discussion
[35] To grant summary judgment to Westpac, I must be satisfied that the second defendant has no defence to Westpac’s claim (High Court Rules, r 12.2).
[36] The second defendant has executed the guarantee as a trustee and so on its face clause 34 applies, subject to the issue of whether the second defendant is a discretionary beneficiary of the Chahil Family Trust. Counsel for Westpac submits that clause 34 applies, or is intended to apply, only if the trustee concerned has executed the guarantee solely in that capacity. Counsel submits that clause 34 does not concern itself with the position which arises if a guarantor is a party in two or more different capacities. I see the force in Westpac’s submission but I am not
satisfied that the second defendant has no defence to the claim. In my view, it is arguable that the wording of clause 34 has the effect in this case of limiting the second defendant’s liability to the assets of the trusts.
[37] I dismiss the application for summary judgment. The second defendant is entitled to costs on a 2B basis, with disbursements to be fixed by the Registrar.
[38] The case is to be given a case management conference, with that date to be notified to the parties in the usual way.
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PETERS J
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