SKUDDER V BARTERCARD NZ LTD HC AK CIV-2010-404-006911

SKUDDER V BARTERCARD NZ LTD HC AK CIV-2010-404-006911 6 April 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-006911UNDER The District Courts Act 1947IN THE MATTER OF an appeal against a decision of the DistrictCourt at AucklandBETWEEN JOSEPH SKUDDERAppellantAND BARTERCARD NEW ZEALANDLIMITEDRespondentHearing: 17 March 2011Appearances: A V Ram for the AppellantE St John for the RespondentJudgment: 6 April 2011RESERVED JUDGMENT OF PRIESTLEY JThis judgment was delivered by me on 6 April 2011 at 12 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:.Counsel/Solicitors:A V Ram, P O Box 4068 Shortland Street, Auckland 1140. Fax: 09 522 9001.Email: tram@amicuslawyers.co.nzE St John, P O Box 105270, Auckland 1143. Fax: 04 499 6118. Email: barrister@estjohn.co.nzSandford & Partners, P O Box 99, Rotorua 3040. Fax: 07 347 9297.Email: law@sandfordpartners.co.nzBackground[1] The respondent (―Bartercard) sued the appellant (―Mr Skudder) for$200,000 in the Waitakere District Court.[2] Bartercard's cause of action was based on a guarantee. It alleged that in April2008 Mr Skudder had signed a personal guarantee for all the obligations, liabilities and responsibilities of a company called Athena Profession Trustees Limited(―Athena) which traded as CBD Properties Trust. The April 2008 date is significant.[3] The commercial relationship between Athena and Bartercard came to an end four months later, in August 2008. By that stage Athena owed Bartercard just under $206,000. Athena was placed into liquidation in April 2009. Bartercard tried to persuade Mr Skudder (who had operated Athena as its sole director) to arrangepayment of Athena's outstanding liabilities. Mr Skudder effectively denied that either he or CBD Properties Trust owed Bartercard any money. Thus Bartercard sued on the guarantee.[4] A barrister prepared Mr Skudder's statement of defence, which denied Bartercard's central claim that he was Athena's guarantor. But Mr Skudder represented himself at the District Court hearing in August 2010 before Judge Taumaunu.[5] Although owed a slightly greater sum, Bartercard's claim under the guarantee was for $200,000, thus keeping the proceeding within the District Court's statutoryjurisdictional limit. On the pleadings, the issue before Judge Taumaunu was simple. Was Mr Skudder the guarantor of $200,000, which Athena, trading as CBD Properties Trust, owed Bartercard?[6] Amongst the various documents produced in evidence at the hearing was a guarantee dated 8 March 2007. Mr Skudder, who had initially denied he had ever signed a guarantee, admitted under cross-examination that he had signed that document as guarantor.[7] Mr Skudder's only pleaded defence in the District Court was that essentially he had not signed a guarantee. He raised various unpleaded defences at the hearing (not relevant to this appeal) which the Judge, although correctly observing that he was entitled to reject unpleaded, nonetheless considered.The appeal[8] Judge Taumaunu concluded that Bartercard had proved, on the balance of probabilities, that Mr Skudder was liable under the guarantee and thus liable for the sum sought, being $200,000.[9] Bartercard additionally sought interest and indemnity costs, to which it claimed it was entitled under a relevant loan agreement. The Judge adjourned that issue for the filing of memoranda. Judgment was ultimately entered against Mr Skudder on 16 November 2010 by the Judge for the total sum (inclusive of interest and costs) of $245,983.98.[10] For reasons not relevant to this appeal, and sourced in part in ss 29(1) and 36(2) of the District Courts Act 1947, it is permissible for a civil party in the District Court to obtain judgment for a claimed sum up to $200,000 which will exceed that figure once interest and costs are added. Both counsel agreed that the sum by which the judgment against Mr Skudder exceeds $200,000 is not subject to challenge by this appeal.[11] What the appellant challenges is the finding that he was liable to Bartercard, as Athena's guarantor, for $200,000.The guarantee relationship[12] Bartercard, as its name suggests, operates a trading programme for its members. Members, rather than buying and selling goods and services for cash, can exchange them for the goods and services of other members. In that context, Bartercard (as it pleaded) is a record-keeper and clearing house for the various trade transactions of its members.[13] As between Bartercard and its members, there were cash transactions on a monthly basis should trade imbalances require. Bartercard would also on occasionsmake loans to its members to fund or seed members' goods and services.[14] Athena, trading as CBD Properties Trust, applied successfully for membership in March 2007. Along with other members, Athena agreed that it wouldaccept Bartercard's terms, conditions, trading rules, and regulations.[15] When Athena became a member in March 2007, a detailed application formsetting out both the company's name and its CBD Properties Trust trading name was submitted to and signed by Mr Skudder. He also completed and signed a documentheaded ―Bartercard New Zealand Ltd agreement, at the foot of which is a five line standard guarantee. This is the guarantee document referred to in [6]. It is unnecessary to set out in full the terms of that guarantee. It constitutes an agreement to indemnify Bartercard against any losses arising out of its agreement with the member (Athena); makes the guarantor liable as a principal debtor; and is expressed to be a continuing guarantee remaining in full force for so long as Athena continues its trading programme or is indebted to Bartercard. That document was before the Judge which eventually, under cross-examination, Mr Skudder agreed he had signed.[16] The evidence in the District Court suggests that on becoming a member, Bartercard advanced Athena $3,000. It has certainly been Mr Skudder's assertion, once he admitted he had signed a guarantee, that $3,000 was the sum he had guaranteed. None of the March 2007 documents refer to such a sum and, as is normal with comprehensive and broadly-based guarantee documents, the five line guarantee which Mr Skudder signed makes not reference to any specific sum. The obligation is open-ended.[17] Just over a year later, in April 2008, the CBD Properties Trust and Athena applied successfully to Bartercard for an increased credit line facility of $200,000.Bartercard's letter setting out its approval of the increased facility is dated 30 April2008, is addressed to the trustees of CBD Properties Trust and starts, ―Dear Mr Joseph Skudder. The letter comprises three pages and was included in the documents before the District Court. Indeed, Judge Taumaunu refers to the facility,commenting that although Athena's original line of credit was $3,000, it was laterextended to $200,000. On the third page of the letter there is an acknowledgementby ―CBD Properties Trust – Joseph Skudder of acceptance of the facility on theterms and conditions contained in the letter, to be reviewed on 31 October 2008. Mr Skudder has signed and dated that letter.[18] The letter sets out terms or conditions of the loan under the heading―securities. These are (I set them out in full because of their importance.):(a) Mr Skudder agreed to provide Bartercard with a Guarantee and Indemnity to be executed by Joseph Skudder in the presence of a witness. A copy of the relevant documentation was attached for his perusal and subsequent execution.(b) Athena was to provide a registered second mortgage over a property at Tinopai on the Kaipara Harbour.(c) A valuation of that property, completed by a registered valuer, was to be supplied showing a net value of not less than $700,000 for the prior mortgagee.(d) The Commissioner of Inland Revenue was to limit his first mortgage security to $300,000.(e) The credit line could be drawn once the security was received.[19] The guarantee Mr Skudder was obliged to sign was attached to the letter. Again, it is unnecessary to set out the terms. .It has six operative clauses and constitutes a full all obligations guarantee by Mr Skudder for CBD Properties Trust as a Bartercard trading programme member. Mr Skudder signed the document and his signature was witnessed on 30 April 2008.[20] As with the March 2007 guarantee document, the more expansive April 2008 document contains no reference to any specific sum, although it is clearly linked tothe three-page 30 April letter. Nor does the letter or guarantee document make any reference to the earlier March 2007 guarantee.[21] For the purposes of the appeal, this 30 April 2008 guarantee document assumes some importance. For some reason (Mr St John on Bartercard's behalf,accepts that it was inexcusable), the document, although clearly forming part of the 30 April loan approval letter, was not produced in evidence in the District Court. The Judge never saw it and based his finding on the fact that Mr Skudder had signed a guarantee document on the earlier the March 2007 guarantee (supra [6]).[22] For reasons which have not been explained, Bartercard never pursued its security entitlement for a registered second mortgage over the Tinopai property. Thus, when Athena ceased to become a Bartercard trading member in August 2008 and defaulted under its obligations, the only recourse available to Bartercard was the Skudder guarantee. It had no security.Application to adduce new evidence[23] Having engaged new counsel, the appellant filed a notice of appeal. Two substantive appeal points were signalled:(a) No guarantee or indemnity for the amount claimedThe notice of appeal asserts that the appellant refused to, and neither signed nor verbally agreed to guarantee an indemnity for the increased line of credit and that there was no requirement for the appellant tosign such a guarantee. The notice of appeal further asserts that ―theappellant plainly and simply did not agree to execute a guarantee orindemnity for the increased line of credit.(b) Repudiation or breach of term in the agreementThis ground of appeal broadly states that the extended $200,000credit facility ―was extended without a further guarantee or indemnitybeing executed by the appellant.[24] Mr St John's understandable reaction to these signalled appeal points was tomake an application to adduce as evidence on the appeal the 30 April 2008 guarantee which the appellant had signed as part of the credit facility documentation. Although, arguably, the respondent might have been able to rely on the earlier March2007 guarantee, the appellant's notice of appeal clearly signalled that, central to the appeal, was the assertion that no guarantee from Mr Skudder had been sought, signed or, indeed, existed for the $200,000 credit facility. Such an assertion is clearly false.[25] The appellant filed an affidavit referring to the new evidence the respondent wished to adduce. He asserts that an officer of Bartercard assured him personally that Bartercard would be taking a mortgage over CBD Properties Trust's asset atTinopai and that, in the event of the debt being called up, it would be paid from the proceeds of the Tinopai sale and not by the appellant personally.[26] Interestingly, the appellant makes no attempt to deny that he signed the 30 April 2008 guarantee. His assertion is totally contrary to the legal effect of the documents. It is also inconsistent with his appeal points which state he did not sign a guarantee. I reject his assertion.[27] Mr Ram opposed the application. He submitted that to admit the documentas fresh evidence would set a bad precedent. A preferable option, in counsel'ssubmission, would be to remit the matter back to the District Court for rehearing.[28] The law relating to admitting fresh evidence on an appeal is tolerably clear. The basic rule is that fresh evidence should not be admitted if it was in existence or ascertainable at the time of trial. However, the courts retain a discretion to admit fresh evidence if the interests of justice so require.[29] Pursuant to r 20.16(2) of the High Court Rules 2008, a party to an appeal may adduce further evidence only with the leave of the Court. The Court may grant leaveonly if there are ―special reasons for hearing the evidence (r 20.16(3)). An example of a special reason, given in r 20.16(3), is that the evidence relates to matters that have arisen after the date of the earlier decision which are relevant to the determination of the appeal.[30] This is not such a case. Here, the respondent seeks to adduce evidence that was readily available at the time of trial. Indeed it was pleaded. The general test to be applied when granting leave is that the evidence must be cogent and not easily capable of discovery at an earlier stage. The rationale underlying this test, as expressed by the Court of Appeal in Telecom Corp of NZ Ltd v CC, is that the appeal should not be regarded as a new trial, with the previous hearing being a mere―dummy run.1 The decisions in Comalco NZ Ltd v TVNZ Ltd and Rugby UnionPlayers' Assn Inc v CC endorse the general proposition that evidence will not be admitted on appeal where it was previously available at trial.2[31] However, in Complaints Committee No 1 of the Auckland District Law Society v P, Duffy J emphasised that discretion to admit evidence remains even when the evidence is not fresh:3There is always room for the special case where fresh evidence is admitted, even though it was reasonably available for the hearing at first instance. The discretionary power in [r 20.16) is broad enough to permit a Court to allow such evidence to be adduced. Furthermore, discretionary authority should never be fettered by fixed guidelines. But such exceptions would be rare and to occur, the fresh evidence would need to be cogent and material to theappeal's resolution, as was the case in Comalco. When the fresh evidence is neither relevant nor likely to be material and, as well as that, is not new (in the sense it was reasonably available at the first hearing) there is no apparent basis for departing from the standard tests for its admission.[32] On the foundation of its cogency and relevance, I unhesitatingly admit the evidence of the 30 April 2008 guarantee. It is essential to do so to grapple with theappellant's signalled appeal points. Having advanced the argument in the District1 Telecom Corp of NZ Ltd v CC [1991] 2 NZLR 557 (CA) at 558.2 Comalco NZ Ltd v TVNZ Ltd (1996) PRNZ 573 (HC); Rugby Union Players' Assn Inc v CC [1997]3 NZLR 79 (HC).3 Complaints Committee No 1 of the Auckland District Law Society v P (2007) 18 PRNZ 760 at [21].Court that he had never signed a guarantee, the appellant agreed in cross- examination that he had indeed signed the March 2007 document. Now, on appeal, he is advancing a closely related argument that there was never any guaranteerelating to Athena's $200,000 extended credit line. The evidence the respondent wishes to adduce shows that the appellant's asserted appeal points are plainly false.It would be a mockery of the justice system if a court were required to decide this appeal oblivious to the 30 April 2008 guarantee. For these obvious special reasons, I admit the evidence exhibiting the 30 April 2008 guarantee document, which, as I have said, was pleaded by the appellant in the District Court.Discussion[33] Mr Ram's written and oral submissions raised the following arguments, noneof which have much substance in the context of this appeal. The arguments were, to a large extent, interwoven and can be summarised as follows.[34] First, counsel submitted that there had not been compliance with the statutory provisions relating to guarantees contained in s 27 of the Property Law Act 2007. Section 27 provides: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.[35] This provision would apply to the 30 April 2008 guarantee but not the March 2007 guarantee. The provision, in any event, does not bring about any change ofsubstance or form so far as a guarantee is concerned. Subsection (3) specifically states that a guarantee contract need not specify the consideration, so the omission of $3,000 and $200,000 in the two guarantees the appellant signed is of no significance.[36] Counsel's related submission was that, particularly because the $200,000 loan obligation was to be secured by second mortgage against Athena's land at Tinopai, it was necessary for the appellant to be independently advised on the guarantee. I reject that submission. No relevant authority has been cited for it. The second mortgage security was, in any event, never given. Furthermore, as sole director and proprietor of Athena and CBD Properties Trust, the appellant would not need independent advice, there being no protective need for it.[37] A related submission of Mr Ram's was that the entire credit facility contractinvolved an offer and acceptance. The offer envisaged the Tinopai second mortgage security. By failing to seek that security but nonetheless advancing the facility, Bartercard had advanced monies on a different contractual basis from that anticipated by the credit facility contract, and thus the appellant should not be bound. There is no merit in that submission. In any event, para 3 of the April 2008 guarantee specifically provides that no indulgence granted to Athena nor any variation of the contractual terms or arrangements nor release by Bartercard of any guarantee of security affect the guarantor's liability. Additionally, even if there was no guarantee arrangement concluded in April 2008, the prior all obligations guarantee of March 2007 would catch the increased credit line facility.[38] Mr Ram further submitted that, looking at the 2007 guarantee, an increase of the sum from $3,000 to $200,000 was a substantial material change. On the authority of Winstone Ltd v Bourne,4 an oral judgment of Mahon J, a material alteration of the principal contract would discharge a guarantor. I very much doubt whether a substantial increase in the sum owed by a principal debtor would ipso facto discharge liability under an all obligations guarantee. That is not the case here, given that the April 2008 guarantee is specifically linked to the increased principal owed by Athena.4 Winstone Ltd v Bourne [1978] 1 NZLR 94.[39] A thematic submission of Mr Ram was that there was no consideration for theappellant's guarantee. That submission is untenable. Both guarantee documentsmake it clear that the consideration, so far as the guarantor was concerned, was theextension of trading facilities and membership of Bartercard's trading programme toAthena and CBD Properties Trust.[40] Mr Ram returned to s 27 of the Property Law Act and argued that, because the credit line facility was used by Athena or CBD Properties Trust to purchase property, the Property Law Act rather than the Contracts Enforcement Act had primacy. Certainly the latter statute requires an agreement relating to land to be in writing and signed by the party against whom the contract is to be enforced. But that is not the case here. Regardless of what Athena and CBD Properties Trust may have done with the monies advanced by Bartercard, neither the loan facility nor the guarantee are documents relating to an enforceable contract to buy land.[41] In short, none of the submissions advanced by Mr Ram come anywhere close to convincing me that there are any proper grounds whereby the appellant can avoid his obligations as guarantor.Result[42] Judge Taumaunu was correct in his decision. He, on the basis of the evidence before him, rightly concluded (supra [17]) that the March 2007 guarantee extended to the extended credit which flowed from the 30 April 2008 letter. Although the Judge did not have the 30 April 2008 guarantee before him, had he seen it, his conclusion would have been the same.[43] The Judge's assessment that the appellant was personally liable under theguarantee, and that the original line of $3,000 credit was subsequently extended to $200,000, was factually correct.[44] The admission, as fresh evidence, of the 30 April 2008 guarantee puts theappellant's liability as guarantor beyond doubt.[45] For these reasons, the appeal is dismissed.Costs[46] It was agreed at a conference before White J on 16 November 2010 that the appeal was classed as Category 2B for costs purposes.[47] The appellant has failed. There is an order that the appellant pay costs to the respondent on the 2B scale........................................Priestley J