DOMINION FINANCE GROUP LTD (IN RECEIVERSHIP AND IN LIQUIDATION) V TAUBER HC AK CIV-2009-404-6248

DOMINION FINANCE GROUP LTD (IN RECEIVERSHIP AND IN LIQUIDATION) V TAUBER HC AK CIV-2009-404-6248 31 May 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2009-404-6248BETWEEN DOMINION FINANCE GROUPLIMITED (IN RECEIVERSHIP AND INLIQUIDATION)PlaintiffAND DAVID ANDREW TAUBERDefendantHearing: 9 May 2011Appearances: A W Johnson & C Mansell for PlaintiffD Grove for DefendantJudgment: 31 May 2011RESERVED JUDGMENT OF ELLIS JThis judgment was delivered by me on 31 May 2011at 11 am, pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors: Martelli, McKegg, Wells & Cormack, PO Box 5745, Auckland 1141V Carmine, PO Box 2603, Auckland 1050Counsel: D Grove, PO Box 130, Auckland 1140[1] This judgment concerns a claim made by the receivers of Dominion Finance Group Ltd ("DFG") under a $5 million personal guarantee given in 2007 by Andrew Tauber. The guarantee relates to a loan of approximately $9 million in relation to a loan made by DFG to Maximum Finance Ltd ("MFL"). An application by DFG for summary judgment against Mr Tauber was declined by Asher J "by afairly bare margin" on 26 February 2010.1[2] It is not in dispute that in 2007 MFL became indebted to DFG for approximately $9 million and that it has subsequently defaulted on the loan (as at August 2008 MFL was over $1.3 million in arrears). Nor is it in dispute that Mr Tauber gave the $5 million guarantee. Rather, he seeks to defend DFG‟s claim under the guarantee on the basis that either:(a) DFG agreed to compromise the debt for $1 million (20 cents in the dollar), payable in staggered lump sum amounts; or(b) DFG made representations that it would accept such a compromise giving rise to an estoppel preventing recovery of the full amount.[3] Although no payments to DFG under the alleged compromise have ever been made by Mr Tauber, he also says that he reached a subsequent agreement with DFG whereby he was permitted to delay making the payments.[4] DFG denies that any such agreements were reached and that any relevant representations were made.[5] The issues now for determination are thus almost entirely factual in nature. It is therefore necessary to traverse the evidence in some detail.1 Dominion Finance Group (in rec and in liq) v Tauber HC Auckland CIV-2009-404-6248, 26 February 2010.Evidence[6] At the outset I record that much was made by Mr Grove (on Mr Tauber‟sbehalf) of the apparent absence of file notes kept by the key DFG players, and in particular Mr Adams who was the lending manager responsible for the MFL loan and with whom Mr Tauber principally dealt. His reason for doing so was the submission that DFG had a higher standard of proof by virtue of its status as a financial institution. Mr Grove said that the absence of file notes should count against DFG‟sversion of events to the extent it conflicted with that of Mr Tauber.[7] I do not accept that submission. While Mr Adams‟ record-keeping may not have been exemplary, in my view the document trail is adequate enough. A tolerably clear picture emerges from the internal DFG email correspondence and the other relevant documents. In fact it appears that Mr Tauber himself did not make file notes and indeed his version of events is largely unsupported by any documentation. And the cases relied on by Mr Grove do not in my view warrant the approach urged upon me.2[8] It appears that Mr Tauber became associated with DFG through his former business partner, Terry Wilson. Mr Wilson himself became involved with DFG by dint of a pre-existing business relationship with the National Bank where Mr Adams worked as a lending manager. When Mr Adams moved to DFG in 2002, it seems that he brought Mr Wilson with him.[9] During 2005 and 2006, a number of business ventures, in which companies owned by Mr Wilson and Mr Tauber were involved and which had been financed (inter alia) by DFG, began to run into difficulties. The companies defaulted on various loan repayments. Both Mr Wilson and Mr Tauber had given various personal guarantees in relation to these (and other) financing arrangements.2 Westpac Banking Corporation v Murray HC Auckland CP 575/93, 30 May 1994 involved asummary judgment application in which the onus was plainly on the plaintiff bank. Westpac v ChinHC Auckland CP 1545/89, 30 July 1992 merely suggests that the presence of confirmatory file notesmay weigh in favour of the bank.[10] Although historically Mr Tauber had played a back seat role in the operation of these businesses, it seems that over this period Mr Wilson‟s involvement began to diminish significantly. Creditors (including DFG) lost faith in Mr Wilson and instead turned to Mr Tauber, effectively requiring him to take a more active part in resolving the difficulties. At some time in late 2006 or early 2007, Mr Wilson went abroad and he remains there to this day. Mr Tauber was left holding the baby.[11] In November 2006, prior to his departure overseas, Mr Wilson came up with a proposal whereby the various debts owed by the Wilson/Tauber enterprises to DFG would be restructured. Essentially this proposal involved:(a) Incorporating a new company (MFL);(b) Rolling up and refinancing all the existing indebtedness through a new loan made by DFG to MFL;(c) An agreement (but not a guarantee) by two charitable trusts (known as the Producer Trust and the Active Trust) that they would underwrite the subsequent loan repayments. The two trusts would meet the repayments from revenue that they received from gaming machines operated at various hotels and pubs owned by the Wilson/Tauber entities;(d) Transferring DFG‟s existing (largely worthless) securities to MFL who would then give DFG a charge over those securities;(e) $4 million personal guarantees by Mr Wilson and Mr Tauber.[12] In the lengthy finance application prepared on behalf of Messrs Wilson and Tauber by Mr Adams in November 2006, he referred to the pros and cons of the proposal in the following terms:RisksContinued miss [sic] management of going concernsOngoing regulatory changes in regard to the gaming industryEstablishments lose Gaming Licences for a variety of reasonsResidual debt after 3 years still profiled to be considerable at $6.3 m.Business valuations very subjective and dependant on business performingMitigantsDebt servicing not reliant on the performance of the going concerns.Belief that the Trustees of Producer and Active are capable and would not enter into commitments they could not fulfil.Wilson and Tauber guarantees retained. Both have superior net worth and in particular Tauber who is thought to be worth $40m to $50m plus.Belief that this is the best way forward for all concerned.[13] Although Mr Adams supported the proposal, its implementation was contingent on Board approval, which was not immediately forthcoming.[14] There followed a lengthy period of further negotiation during which time Mr Tauber became increasingly involved notwithstanding his initial reluctance to immerse himself further. There can be little doubt that his active participation (and a corresponding absence of participation by Mr Wilson) was effectively one of DFG‟spre-requisites for entertaining the proposal. As well, the proposed underwriting by the two Trusts was dependent on receipt of a legal opinion confirming that meetingthe loan repayments would constitute an "authorised purpose" under the GamblingAct 2003.[15] In February 2007, Mr Adams emailed Mr Tauber referring to the continued reluctance of DFG‟s Directors to agree to sign off on the MFL loan. He said:...I am again being challenged as to why we just don‟t take action now. Imaintain that proposed structure represents the best way forward for all concerned but I am struggling to convince the wider Board. They need assurance that you are totally committed to this solution.Accordingly Dominion will agree to the proposed restructuring on the basis that personal guarantee is increased to $6m (67% debt coverage) but with thecontinued proviso that amount of guarantee reduces in line with principal reductions. ...[16] On 14 February 2007, Mr Tauber replied:I have very few personal assets, so it is unrealistic to raise the level of personal guarantee over that originally mooted. I have a prospect of dealing with a personal guarantee of between $2m and $4m out of future income, so that is what I agreed to....If Dominion now wishes to discontinue with the restructure as mooted and agreed in principle, please advise. If this is the case, I suggest Dominion contacts Grant Graham of Ferriers, whom I have engaged to deal with a variety of creditors. I have limited personal assets, but I will enter into a compromise to pay people out of future income. However all creditors will be entitled to participate of which Dominion is only one. This will be a very costly process for all concerned, and a very large waste of money. If you are going to go down this route, we may still need to work together to get the best outcome for Dominion and to prevent other substantial lenders calling in substantial personal guarantees....[17] Mr Tauber‟s statement that he had few personal assets was confirmed by him in evidence before me. He said that since the time he had become a partner in Ernst & Young, he has taken care to ensure that he personally owns nothing. That means (he says) that the result of any judgment on the full amount of the guarantee will be his bankruptcy.[18] In any event, and notwithstanding Mr Tauber‟s 14 February email, it appears that by 16 February, he and DFG had agreed that his personal guarantee should be increased to $5 million and on 19 February, Mr Tauber was advised that the DFG Directors had agreed to the restructuring proposal. This agreement was reached in the face of what Mr Tauber had advised about the limits of his capacity to pay undera guarantee and despite an apparently equivocal legal opinion as to the Trusts‟ abilityto underwrite the obligations under the loan. Plainly, there was a good deal of finger-crossing on both sides.[19] March, April and May 2007 were occupied largely by preparation of the relevant documentation which was, for reasons that are not presently material,considerable. The new loan agreement and Mr Tauber‟s $5 million personalguarantee were ultimately executed on 30 May 2007.[20] It was less than two weeks later, on 11 June 2007, when Mr Tauber emailedMr Adams raising the possibility of a creditors‟ compromise. He said:Please confirm a meeting time for Grant [Graham of Ferrier Hodgson] and I [sic] to come and discuss a proposed compromise that will enable me to make contributions to Dominion Finance.[21] On the following day, 12 June, Mr Adams emailed DFG‟s Chief ExecutiveOfficer Mr Cropp stating:Andrew Tauber and Grant Graham are keen to come and see us about aninformal compromise structure to tidy up Andrew‟s affairs.[22] On 14 June, there was a meeting between Mr Tauber, Mr Adams and Mr Cropp.[23] Mr Adam‟s report of the 14 June meeting was contained in a contemporaneous email to the members of DFG‟s credit committee. He said:Today Paul Cropp and I met with Andrew Tauber. He is working through the process of clearing up the mess left by Terry Wilson in dealing with various unsecured creditors including landlords and breweries.[24] The specific reference here to "landlords and breweries" no doubt partly reflected Mr Tauber‟s position at that time as a defendant in summary judgment proceedings commenced by New Zealand Breweries Limited (in relation to debts owed by the company Jokers Wild Ltd in respect of which Mr Tauber had given a guarantee) and as the defendant in another summary judgment application made by Auckland City Council (for unpaid rent). In fact, judgment had been entered against Jokers Wild Limited on 7 June 2007 and judgment was entered against Mr Tauber in relation to the Auckland City Council debt the following month.[25] In his reporting email, Mr Adams then went on to state:He is proposing to offer creditors 0.25c in the dollar over four years but with an opening payment of 0.15c. If accepted the payment pool would equate to some $370k. Under proposal no funds would be offered to Dominion andwe would continue to work with the strategy current [sic] in place–Trusts/Welcome Bay.However Tauber is anticipating some resistance to [the] proposal and does not want to be tipped over by what could potentially be a minor creditor (although you could argue why not just pay them out?). As an alternative strategy he is proposing to enter into a creditors compromise where he agrees to pay 0.13c in the dollar over the same four year period but with payments weighted heavily towards years three and four. Under thisproposal Dominion‟s debt of some $9m would be introduced into the equation meaning we would receive 0.13c in the dollar from an increased pool of $1.5m. While the pool [is] larger the net effect is that creditors (other than Dominion) would receive less and with a structure that deferred majority of payments. With Dominion‟s involvement and agreement therewould be an excess of 75% support meaning compromise would proceed.We have been asked to provide our approval in case creditors do not accept the initial offer of 0.25c. I would like to provide our agreement to the compromise on the basis that other satisfactory security is provided to offsetthe dissipation of Tauber‟s existing personal guarantee of $5m. I proposethat this would be in the form of a guarantee from his family trust or entity with tangible means and assets. This would be subject to further credit approval process. Once compromise [is] completed we may then consider releasing the family trust guarantee and take [a] new personal guarantee from Tauber.[26] In his evidence, Mr Tauber maintained that Mr Adams‟ proposal involving increased or varied security was never put to him and, if it had been, he would not have agreed to it. However in other respects Mr Adams‟ account seems generallyconsistent with an agenda for the meeting that had been prepared by Mr Tauber. Although somewhat delphic in its terms, that agenda clearly referred to the"objective" being to "process compromise of 13c in the $1 (alternatively 25 c settlement)". In terms of the respective benefits of the proposal, the agenda states:Advantage:Need to continue to operateAllows me to work out of the positionAvoids involving second tranch [sic]Simplify problem so I can concentrate on HSBC & DominionAdvantages to DominionTrade creditors are not advantagedAllows AT to simplify and concentrate on the 2 issues onlyDoes not need to interfere with Dominions [sic] position[27] On 15 June 2007, one of the members of DFG‟s credit committee, Mr Whale, emailed Mr Adams and other members of the committee saying:I didn‟t understand the proposal. Is Tauber proposing the compromise for himself? I find it hard to believe first that Tauber would go through thehumiliation of standing before all creditors to say he can‟t pay, and secondlythat he would have any chance of getting creditors to believe that he can only front up with $370k over four years!![28] No doubt this confusion arose from the reference in Mr Adams‟ email to the$9 million debt owed to DFG by MFL on the one hand, and Mr Tauber‟s guaranteeon the other. The position was clarified by Mr Adams‟ reply on 17 June. He advised (inter alia):Compromise/scheme relates to Tauber personally and not any associated company including Maximum....Differing amounts again a negotiation tool. If creditors accept the 0.25c then $370k will meet this commitment. Dominion and HSBC are excluded from the 0.25c offered. If creditors refuse then formal compromise will be required which will include DFG and HSBC asTauber‟s personal guarantee is unsupported. On this basis at 0.13c thepool would have to be increased to $1.5m.I don‟t believe Tauber wants to go down the compromise path but isusing threat of this as encouragement for creditors to accept the 0.25c. While I am not completely comfortable with process it is definitely inDominion‟s interest to support. With these troublesome issues out ofthe way Tauber can concentrate on repaying Dominion‟s debt withoutrisk of being tipped over personally.All we are being asked for at present is a letter of support for a compromise if circumstances demand. Agree that before committing we would need to be certain that the structure did not compromise our position and/or dilute PG. In this regard Grant Graham of Ferrier Hodgson is advising that we will wait and see what he advises, but at this stage we are just being asked for a non-binding letter of support.[29] On the same day (17 June 2007) Mr Adams emailed Mr Tauber a letter (although the letter was dated the following day) stating:Further to recent conversations I confirm Dominion Finance Group, in principle, would be agreeable to enter into a scheme of arrangement (creditorcompromise) to cover obligations presently covered under your unsupported personal guarantee.This is on the understanding that the scheme would be for 0.13c in the dollar with a total pool of $1,500,000 available for distribution over a four year period, less cost of administration expected to be no more than $100,000.Please forward full Ferrier Hodgson report for consideration and approval.[30] And in the covering email Mr Adams said to Mr Tauber:Trust this will assist? Please contact me direct if any amendments required.[31] On 16 July 2007, Mr Tauber emailed Mr Adams saying that Auckland City Council was considering the proposed compromise. He referred in the email tohaving a "rental dispute in court" with the Council. In fact the Council‟s appeal from the District Court‟s refusal to enter summary judgment had been heard in theHigh Court that day.[32] On 22 August (by which time Baragwanath J had upheld the Council‟s appealand entered summary judgment against Mr Tauber), Mr Tauber emailed Mr Adams saying:I am progressing a compromise as discussed because ACC will not wait.Can Grant Graham and myself meet with you and Paul Cropp next week to discuss the process? Please suggest a time.[33] A copy of the proposed compromise was forwarded to Mr Adams by Mr Tauber on 28 August. In the covering email he said:Please read the key parts ... in clauses 5-9 of the compromise.Subject to our meeting tomorrow, I would like a Dominion letter to Ferriersalong the lines, "Dominion has received the compromise documentationfrom Mr Tauber. Dominion will vote in favour of the compromise scheduledfor 30 November 2007, subject to Board approval." Ferriers can then produce a letter to me, saying they have acceptances or indications of acceptances greater than 75% of the value, which I can give to Auckland City Council regarding their $120kish claim.[34] The draft compromise that accompanied the email contained a schedule of creditors. Those creditors were divided into two tranches.[35] The second tranche, comprising HSBC, Capital and Merchant Finance andASF, were recorded as being owed over $40,000,000. However in Mr Tauber‟saccompanying statement, he explained that those creditors had agreed to vote(positively) in the compromise but "would not prove" for the amounts owing.[36] The first tranche debt amounted to approximately $11,280,000 spread between 24 named creditors. However 88 per cent of that debt was owed to the first group of creditors listed in the first tranche (the first group is clearly demarcated from the second group of remaining creditors by the font used). The most significant creditors contained in the first group were:(a) DFG (44 per cent);(b) Mr Tauber‟s own companies, Honk Group Ltd (11 per cent) and Honk Events Ltd (29 per cent). Mr Tauber explained in the accompanying statement, Honk Events Ltd had recently acquired a $3,261,000 debt owed by Mr Tauber to HSBC; and(c) BNZ (2 per cent);[37] Both DFG and the Honk companies are noted in the Schedule as supporting the proposed compromise. The Schedule states that there has been "no discussion to date" with BNZ.[38] The second group of creditors in the first tranche principally comprised the"breweries and landlords" who were actively pursuing Mr Tauber. They wererecorded as "considering compromise".[39] In terms of the contents of the proposed compromise, the draft stated that Mr Tauber would set aside an amount of $1.5 million over a period of four years which, after the payment of $100,000 administration costs, would be made available over that time in five increasing tranches ($100,000 after 90 days - $500,000 after four years and 90 days). The proposed payments less the administration costsequated to approximately 13 cents in the dollar (over four years). The compromise stated:The proponent may borrow from Banks and pay to Creditors with claims other than Dominion Finance & the Honk Group 13 cents in the dollar of their claim on or before the date 90 days after the Commencement Date,3provided that proofs on debt are agreed promptly.[40] Taken at face value this statement suggests that no payment under the 13 cent compromise would be made either to DFG or to the Honk companies.[41] The draft compromise then went on to say:The proposed compromise and any amendment to it proposed at the meeting of creditors will be approved if a majority in number representing 75% in value of creditors who vote, cast their vote in favour of it....Only in the case of unanimous acceptance of the compromise by all creditors in the list of creditors attached to this compromise, the proponent will lift the payment to 20 cents (from approximately 13 cents) in the one dollar payable ...[42] On 29 August, a meeting between Mr Tauber, Mr Graham, Paul Cropp and Mr Adams took place. As I have noted above, Mr Tauber prepared an agenda for this meeting, which stated (inter alia):Honk's concessions to compromise:Honk‟s share will go to Dominion in reduction of $5m PG.AT will resign PGs for $5m less reduction by way of payments under compromise and elsewhere.[43] It appears that no minutes of the meeting were taken by any of the attendees. But on 31 August 2007, Mr Adams drafted the letter earlier requested by Mr Tauber for Ferrier Hodgson. The final wording was somewhat more elaborate than that which had been proposed by Mr Tauber. The letter stated:I acknowledge Dominion Finance Group Limited has received the proposed compromise document from Mr Tauber.3 The commencement date was defined to mean the date upon which a resolution approving the compromise was passed by the requisite majority of creditors.After careful consideration and debate Dominion will support proposal and will vote in favour of the compromise scheduled for the 30 November 2007. We have urged Mr Tauber to actively canvas all affected parties to also support proposal as of course .020c [sic] in the dollar is preferable to the 0.13c.Final approval is for the Board.Please contact me direct if you have any questions, otherwise please let me know if the outcome of the proposed compromise.[44] Mr Adams (and the other DFG witnesses) all denied that "Board approval"was ever forthcoming. Mr Tauber‟s evidence was somewhat conflicting on the point:(a) In his evidence in chief, he said that Mr Adams „subsequently confirmed that they [the Board] had agreed with the compromise";(b) Under cross-examination, he said that Mr Adams confirmed that he had discussed the proposal with Mr Cropp and that he assumed it had been confirmed;(c) Later, in response to a question from the bench, he stated that it was the 31 August letter itself that he regarded as evidencing DFG‟sagreement to the compromise.[45] In the event, however, there was no creditors‟ meeting on 30 November 2007and no vote was ever taken on the compromise. Although in his evidence in chief Mr Tauber said that this was because he had obtained a 100 per cent buy-in from all creditors informally, that position was inconsistent with his statement that not all creditors had in fact been approached.[46] What seems clear, however, is that Mr Tauber did (in December 2007) subsequently achieve settlements involving payment of 20 cents in the dollar with the six more significant of the creditors in the second group of the first tranche, i.e. the pubs and landlords. This was confirmed by Mr Tauber in an email to Mr Adams on 19 December 2007 and in his evidence. Thus the 20 cent payment was made notwithstanding the absence of unanimity.[47] It is also apparent that between September and December 2007 (when Mr Adams left DFG) informal meetings took place between Mr Tauber and Mr Adams. Plainly, there were ongoing difficulties about the Trusts‟ use of gamingrevenue to meet the MFL debt and Mr Tauber and Mr Adams continued to discuss other possible solutions.[48] No documentary record of these meetings (which took place at the Jolly Farmer pub) exists. It is during these meetings that Mr Tauber says that the further agreement (about the deferral of the staggered payments to DFG under the compromise) was reached. Mr Adams categorically denied that and said that all that was discussed was ways in which the MFL debt could be reduced and DFG‟sposition protected.[49] Because of the conclusions I reach below in relation to the compromise, however, I do not need to rehearse the respective evidence of Messrs Tauber and Adams on this issue in any further detail.[50] Finally, it is necessary to record that there was no evidence (documentary or otherwise) that DFG took formal steps at any time during 2007 to call up Mr Tauber‟s personal guarantee. That did not occur until after the appointment ofthe receivers. Mr Tauber‟s evidence was that he regarded payment under theguarantee as having been implicitly demanded when DFG agreed to the compromise on 31 August 2007.Discussion/analysis[51] In many ways, the evidence speaks for itself. However the following conclusions can in my view sensibly be drawn from it.[52] At the time of executing the MFL loan agreement and Mr Tauber‟s personalguarantee, both Mr Tauber and DFG regarded the restructure (and in particular the undertaking given by the two charitable trusts) as constituting their best chance of achieving at least partial repayment of the amounts owing as a result of the collapse of the Wilson/Tauber businesses.[53] Mr Tauber‟s personal guarantee may have added somewhat to DFG‟sconfidence in the restructure although it was principally relying on Mr Tauber‟scommitment to work to resolve the MFL debt. DFG had earlier personal guarantees from Mr Tauber upon which it could have relied had the restructure not gone ahead.[54] Mr Tauber‟s approach to DFG about a possible compromise in June 2007 was not focused on his (contingent) liability under the personal guarantee. Although DFG was technically a creditor (by virtue of the contingent liability created by the guarantee) his concern was to deal with those creditors who were at that moment pressing him for payment: the "breweries and landlords" (including in particular those who had or were about to obtain judgment against him).[55] Given that the proposal came a mere two weeks after Mr Tauber‟s entry into the new guarantee, DFG‟s response to the proposal would hardly have been sobenign had it considered that it was intended to affect its own position. And as Ihave said, there was no evidence (beyond DFG‟s general level of anxiety) that DFGever signalled its intention to call up the guarantee at any time during 2007. Rather, the evidence suggests that throughout 2007, DFG sought Mr Tauber‟s activecooperation in ensuring that the MFL debt could be serviced.[56] On my analysis, Mr Tauber‟s approach to DFG in June 2007 was merely a request for assistance in achieving settlement with comparatively minor, but demanding, creditors for 25 cents (later 20 cents) in the dollar.[57] It was, of course, in DFG‟s interests to help Mr Tauber achieve this aim as he would then be better able to concentrate on reducing the debt owed by MFL to DFG. It commercially made sense for DFG to assist, provided it resulted in neither loss nor increased risk to DFG.[58] The way in which Mr Tauber proposed to persuade his more pressing creditors to settle was by indicating that the agreement of each of them was essential to any of them receiving payment of the higher (25 cents) amount. He could do this by showing that he already had sufficient (over 75 per cent) creditor support to push through a lower compromise of 13 cents in the dollar, regardless of the agreement ofthe pressing creditors. If DFG gave an indicative buy-in to a compromise for that lesser amount Mr Tauber would be able to do this because the debt owed to DFG combined with the debt owed to his own Honk companies constituted 84 per cent of his total relevant debt.[59] DFG‟s indicative buy-in took the form of the 31 August 2007 letter, the gist of which was written by Mr Tauber. In my view the letter was carefully framed, both in the original by Mr Tauber, and in the final version by Mr Adams. It was deliberately drafted to commit DFG to nothing, while also conveying the desired message and enabling it to be used to place pressure on potentially less accommodating creditors.[60] At its highest the letter does no more than say that DFG will vote in favour of the compromise at the 30 November meeting. DFG cannot be said to be in breach of that obligation because there was no meeting and there was no vote. But even if that statement could somehow be interpreted as conveying some more general agreement with the compromise, that agreement was very clearly made subject to "Board approval".[61] The conclusion that the 31 August letter cannot tenably be interpreted as Mr Tauber now suggests is in my view borne out by:(a) the fact that the compromise itself appears to exclude any payment being required to be made either to DFG or to the Honk companies;(b) the fact that there is no evidence that the proposed compromise was ever formally put to or approved by the DFG Board; 4(c) subsequent events (namely settlement with six pressing creditors only, at 20 cents in the dollar notwithstanding absence of unanimity).[62] Thus, and as Mr Adams frankly accepted in his evidence, the intended audience for the 31 August letter was not Mr Tauber, but his pressing creditors.4 It is in my view quite unreasonable to suggest that an event should have been documented by a filenote.[63] I accept that there was necessarily a small risk that DFG‟s letter would notachieve its purpose and a formal vote on the proposed compromise might in the end be required. Had that occurred, however, DFG had not unequivocally committed to voting in favour although there was plainly some discussion about the terms upon which it might do so. In my view, the common understanding was that if ultimately required, DFG would vote in favour provided its existing position would not be materially affected. Thus it seems that some of the ideas that were floated were that:(a) DFG would also receive the other friendly creditors‟ (Honkcompanies‟) share of any compromise, giving them over 84 per cent of the $1.4 million;(b) by way of quid pro quo, Mr Tauber might be permitted to reduce his personal guarantee to reflect any such payment;(c) Mr Tauber would nonetheless be required to "resign" further guarantees for any outstanding amount (or provide a guarantee from an entity associated with him that had realisable assets).5[64] Such matters are, however, largely matters of irrelevant speculation. Even ifI were to accept (for example) Mr Tauber‟s evidence that he was at no point advisedthat there would be an additional security requirement (and I am bound to say that I consider that to be implausible) that does not ultimately assist him. That is because there never was a formal compromise, a vote, or the need for DFG Board approval. DFG‟s indicative letter had its effect and settlements (for 20 cents in the dollar) were achieved with the "breweries and landlords" (including the Auckland City Council) notwithstanding that there was never, in fact, unanimous support for the compromise. Mr Tauber‟s guarantee was not called upon until the receivers wereappointed.[65] It follows that I also do not accept that any representations were made to the effect that DFG would compromise Mr Tauber‟s debt under his guarantee. For the5 See for example Mr Tauber‟s agenda for the meeting on 14 June which states that the proposalallows Mr Tauber to "concentrate on ... Dominion" and that it "Does not need to interfere withDominion‟s position".reasons already given I consider that the extent of any representations made were to the effect that:(a) DFG would provide Mr Tauber with an indicative letter aimed at facilitating his proposed settlement with other pressing creditors while not committing DFG to anything; and(b) DFG would, if necessary, vote in favour of a formal compromise, but on terms which protected its existing position and which were approved by the Board.It necessarily also follows that there could be no subsequent agreement to defer payment under the compromise. There was no such compromise.[66] For the reasons I have given, Mr Tauber remains liable for the full amount under the guarantee. Judgment in the sum of $5,000,000, together with interest at the Court rate from the date these proceedings were commenced, is entered against him accordingly.[67] The receivers are also entitled to costs on a 2B basis.______________________________Rebecca Ellis J