Xie v Wang

[2016] NZHC 2756

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-001214 [2016] NZHC 2756

BETWEEN

JIQING XIE

Plaintiff

AND

WANG HUI (HELEN WANG) Defendant

Hearing:	17 November 2016
Counsel:	K M Austin for Plaintiff No appearance for Defendant
Judgment:	17 November 2016

ORAL JUDGMENT OF DOWNS J

Solicitors/Counsel:

Prestige Lawyers Ltd, Auckland.

JIQING XIE v WANG HUI (HELEN WANG) [2016] NZHC 2756 [17 November 2016]

The issue

[1]      Mr Xie lent money to Mr Wang.  Mr Wang did not repay Mr Xie – and has since  gone  bankrupt.    Mr  Xie  seeks  to  enforce  against  Mrs  Wang  an  alleged guarantee in relation to her husband’s debt.   The application is by way of formal proof because Mrs Wang has not filed a statement of defence or for that matter, taken any other step in connection with this proceeding.

The facts

[2]      The facts are simple.

[3]      In 2002 and 2003 Mr Xie lent Mr Wang a total of $150,000: $20,000 in early

2002; $100,000 in January 2003; and $50,000 in April 2003.  Mr Wang signed three related acknowledgements of debt.   Interest was payable and paid – until October

2009, when Mr Wang stopped paying any.  Mr Xie says Mr Wang told him his car business had foundered.   But Mr Xie also says he learnt Mr Wang was spending money “recklessly”.   In this context the true position matters not.   In June 2010

Mr Xie agreed to waive outstanding interest provided Mr Wang repaid the $150,000. Mr Wang agreed.  So, on 20 June 2010 the parties entered into the agreement set out below, which Mrs Wang signed as “guarantor”:

Repayment Agreement

Party A: Wang Yang      …

Party B: Xie Jiqing      …

The two parties, upon amicable consultation, conclude and enter into this Agreement regarding Party A’s owing Party B NZD ONE HUNDRED AND FIFTY THOUSAND ONLY (NZD 150,000).

Party A agrees to repay Party B NZD FOUR THOUSAND ONLY (NZD

4,000) every month before the fifth day of that month in cash from October

1, 2010; to repay Party B NZD SIX THOUSAND FIVE HUNDRED AND SEVENTY TWO ONLY (NZD 6,572) every month before the fifth day of that month in cash from January 1, 2011.   Party A will repay the entire amount if owes Party B before October 21, 2012.   Considering Party A’s poor operation state, Party B voluntarily gives up the interest incurred from the balance payable by Party B during the repayment period.  In case that Party A fails to repay the debt in accordance with the date agreed upon in this Agreement, Party A shall pay Party B monthly liquidated damages at two percent of total amount of debt.  In case that the payment is overdue for more than three consecutive months, Party A agrees that Party B will settle

the repayment matter by judicial procedure.  The guarantor shall undertake joint and several liabilities therefor.

This Agreement shall come into force upon the acceptance and signature of both parties.  This Agreement is made in duplicate, each bearing the same legal effect.

Signature of Pary A: Address: …

Signature of Party B: Signature of guarantor: Date: June 20, 2010

Address of signing:  … Apartments, Auckland, New Zealand.

Date: June 20, 2010.

[4]      It seems reasonable to assume the agreement was not drafted by a lawyer.

[5]      Notwithstanding the agreement, Mr Wang paid Mr Xie nothing.  Mr Xie has tried to enforce the agreement.  He served a formal demand on Mr Wang on 21 April

2016.  Attempts to serve Mrs Wang with a formal demand have failed, but through no fault of Mr Xie.  On 27 July 2010 Mr Wang was made bankrupt.

[6]      Mr Xie commenced these proceedings on 30 May 2016.  On 18 August of that year, Associate Judge Bell permitted substituted service in relation to Mrs Wang through personal service upon Mr Wang; it appears Mrs Wang is now in Australia. Mr Wang was served on 31 August 2016.   Ms Wang has not filed a statement of defence.

[7]      On 26 October 2016, Duffy J directed the case proceed by way of formal proof.1

1      High Court Rules, r 15.9.

Analysis

[8]      In proceedings for the enforcement of a guarantee, the primary questions are whether the guarantee has been correctly executed, and gives rise to the obligation alleged.2   Both find expression in s 27 of the Property Law Act 2007:

27   Contracts of guarantee must be in writing

(1)   This section applies to contracts of guarantee coming into operation on or after 1 January 2008.

(2)   A contract of guarantee must be—

(a)   in writing; and

(b)   signed by the guarantor.

(3) Subsection (2) does not require the consideration for a contract of guarantee to be in writing or to appear by necessary implication from a writing.

(4)   In this section, contract of guarantee means a contract under which a person agrees  to  answer to  another person for  the debt, default,  or liability of a third person.

[9]      Under the agreement, Mrs Wang assumed joint and several liability with Mr Wang.  However, a guarantee is not confined to the paradigm situation in which the debtor’s default gives rise to the guarantor’s obligations.   The Laws of New Zealand provides a contract is one of guarantee even when it constitutes a joint promise by the guarantor and principal debtor under which an immediate obligation is assumed to the creditor.3    As will be apparent, subsection (4) above is similarly

broad.4

[10]     While the agreement could have been more clearly expressed, it was clearly intended to bind Mrs Wang in relation to her husband’s indebtedness.  The use of the term “guarantor” confirms as much.  So too context.  Mr Wang had fallen behind on

repayments of interest.   Mr Xie agreed to forgive outstanding interest payments,

2      John Burrows Jeremy Finn and Stephen Todd The Law of Contract in New Zealand (5th edition, LexisNexis, Wellington, 2015) at [9.3.1].

3      Laws of New Zealand Guarantees and Indemnities (online looseleaf edition, LexisNexis), citing

Stotter v Equitcorp Australia Ltd [2002] 2 NZLR 686 (HC) at [25].

4      And in any event, Mr Wang did default on his obligations.

provided  Mr Wang  repaid  principal.    In  those  circumstances,  a  guarantee  from

Mrs Wang made obvious sense.

[11]     This leaves only the execution issue.  Adequate identification of the parties is a requirement of any contract, even those outside s 27.5    The agreement does not have Mrs Wang’s name on it.  And her signature is not annotated with her name. However, the agreement is signed in connection with the heading, “Signature of Guarantor”.  Proof in this context is a question of law.6   Mr Xie knew Mrs Wang, and he has sworn an affidavit Mrs Wang signed the agreement as guarantor.  There is no contrary evidence before me.

[12]     I  conclude  the  agreement  constituted  a  guarantee,  and  one  Mrs  Wang executed as guarantor.

Conclusion

[13]     Mrs  Wang  is  liable  under  the  agreement  for  repayment  of  principal  –

$150,000 – and outstanding interest of $220,500.

[14]     Mr Xie seeks costs on a 2A basis.  There is no reason for these not to follow the event.  I make that award.

……………………………..

Downs J

5      See Penguin Books (NZ) Ltd v Todd HC Auckland CP 605-IM00, 28 June 2001.

6      John Burrows Jeremy Finn and Stephen Todd The Law of Contract in New Zealand (5th edition, LexisNexis, Wellington, 2015) at 293; see also  Composite Retail Society Ltd v  Pryde HC Auckland CIV-2004-404-7011, 10 October 2005.