LOOKMAN v DESIGN ELECTRONICS LTD [2018] NZHC 3396

LOOKMAN v DESIGN ELECTRONICS LTD [2018] NZHC 3396 [18 December 2018]IN THE HIGH COURT OF NEW ZEALANDNELSON REGISTRYI TE KŌTI MATUA O AOTEAROAWHAKATŪ ROHECIV-2018-442-000041[2018] NZHC 3396BETWEEN MICHAEL ANDREW LOOKMAN and 187BRIDGE TRUSTEES 53 LIMITED asTrustees of the LOOKMAN FAMILYTRUSTPlaintiffAND DESIGN ELECTRONICS LIMITEDFirst DefendantAND RICHARD WARWICK JONESSecond DefendantHearing: 27 November 2018Appearances: G M Downing for PlaintiffS J Jamieson for First and Second DefendantsJudgment: 18 December 2018JUDGMENT OF ASSOCIATE JUDGE MATTHEWSIntroduction[1] Issues between the parties to this case are the subject of two earlier judgmentsof this Court.1[2] As background, the following passages are reproduced from the latter of thesejudgments:1 Lookman v Design Electronics Ltd HC Nelson CIV-2018-442-000006, 6 March 2018; Lookman vDesign Electronics Ltd [2018] NZHC 904[12] On 14 December 2016 the parties entered an agreement titled"Investment and Shareholding Agreement 14 December 2016". Theagreement was for a term of five years "unless terminated earlier inaccordance with its conditions". It recorded that the Lookman trustees wouldadvance $2,100,000 "on a reimbursement model" to Design Electronics fromthe date of an earlier promissory note issued on 8 May 2016. The funds wereto be interest free for a period of one year from the date of the first advance,after which interest would be charged at 10 per cent per annum payablemonthly. The document is expressed to be the entire agreement between theparties in relation to its subject-matter, replacing and extinguishing all prioragreements, draft agreements, arrangements, undertakings or collateralcontracts of any nature made by the parties, whether oral or written, in relationto such subject-matter.[14] The Lookman trustees have advanced $1,820,000 pursuant to thisagreement. The security to be given to the Lookman trustees was "securityover SenSys IP" the name SenSys being the defined name of DesignElectronics in this agreement. A personal guarantee was also to be given tothe Lookman trustees from the director of Design Electronics, Mr WarwickJones.[3] The Lookman Family Trust (the Trust) now sues Design Electronics Ltd,together with the second defendant, Mr Jones, its director and a shareholder (alongwith his wife, Ms Matthews) for specific performance of obligations said to lie onthose parties under the agreement. The orders sought are set out in three schedules,and each schedule relates to clauses in the agreement. It is convenient, therefore, toset out each clause which Mr Lookman says has not been complied with, together withthe clause of the agreement from which it is derived.[4] Clause 6:Requirements A Personal Guarantee to the Lender from the CompanyDirector on behalf of the existing shareholders. PersonalGuarantee is to be released at the time shareholding istaken up. The shareholders will not act to remove fromaccess any value supporting the personal guarantee.Security over SenSys' IP will be provided against the loanto the Lender. Once proper and adequate IP protection isin place in the name of SenSys this security will bereleased.Personal guarantees and security over IP protection will beprovided within 15 days if the lender requests.The names of major customers and contact persons remainavailable always.The Company's product costings shall remain availableand verifiable.Order sought:(C1) The Second Defendant shall forthwith execute in favour of the Plaintiffa Personal Guarantee of the First Defendant's liability under theInvestment and Shareholding Agreement dated 14/12/2016 in the formattached to this Schedule.(C2) The Second Defendant shall forthwith deliver to the Plaintiff suchexecuted Personal Guarantee and a Statutory Declaration listing all hispresent assets and liabilities, and listing any changes to his assets andliabilities since December 2016.[5] Clause 8:Provision of The Lender agrees to provide the treasury function ofServices SenSys through to the end of Dec 31 2017.Lender may at their discretion supervise accounting staff toensure that relevant financial reports are produced on a timelybasis.SenSys' electronic accounting system and records will beavailable to enable independent access to statements.Lender will arrange bank financing.Order sought:The First Defendant shall:Access to Electronic Accounting System(B1) Forthwith provide access to Michael Lookman to the First Defendant'sElectronic Accounting System; and continue to provide such access.Financial Documentation(B2) Forthwith provide the following classes of the First Defendant'sFinancial Documentation to Michael Lookman by email atmichaellookman@gmail.com; and shall continue to provide updatedFinancial Documentation by email monthly in relation to each classlisted below which is produced monthly or annually in relation to eachclass listed below which is produced annually:(a) Monthly and year-to-date financial statements from August 2017to the date of this Order ("to-date");(b) Monthly balance sheets from August 2017 to-date;(c) Monthly listings of accounts payable from August 2017 to-date;(d) Monthly listings of accounts receivable from August 2017 to-date;(e) Monthly cash flow for the months from August 2017 to-date;(f) Six monthly cash forecasts from the date of this Order;(g) Annual budget for the year ended 31 March 2019;(h) Annual financial statements and tax returns for the year ended31 March 2017 and 31 March 2018;(i) Monthly detailed breakdown of all inventory on hand fromAugust 2017 to-date;(j) Monthly details of all product costings from August 2017 to-date;(k) Copies of all bank statements, including current account and loanaccounts from August 2017 to-date;(l) Copies of documents recording any changes in shareholding ofthe First Defendant company from August 2017 to-date;(m) Details of all shareholder loans or third party loans, to or fromthe First Defendant, and copies of the terms and conditions ofsuch loans from December 2016 to-date.Sales Information(B3) Forthwith provide the following Sales Information to MichaelLookman; and shall continue to provide updated Sales Information atleast monthly in relation to each category listed below:(a) Name and contact person of all major customers from August2017 to-date;(b) Sales reports in table form with listing of major sales prospectsand potential sales volumes from August 2017 to-date;(c) Sales report per customer compared to budget from August 2017to-date;(d) Copies of agreements with Farmlands and Genesis Energy fromAugust 2017 to-date;(e) Copies of agreements with network suppliers (either LORAN,LNC or other networks) from August 2017 to-date.Intellectual Property Information(B4) Forthwith provide the following Intellectual Property Information toMichael Lookman; and shall continue to provide updated IntellectualProperty Information at least monthly in relation to each category listedbelow:(a) Monthly reports on Intellectual Property from August 2017 to-date;(b) Copies of all invoices and correspondence with Ellis Terry ofWellington (or with John Terry, principal of Ellis Terry) fromMarch 2017 to-date.Operations and Product Development Information(B5) Forthwith provide the following Operations and Product Developmentdocumentation to Michael Lookman; and shall continue to provideupdated Operations and Product Development documentation at leastmonthly in relation to each category listed below:(a) Monthly reports on operations and product development(detailing all products, development and all supporting softwaredevelopment) from August 2017 to-date;(b) Copies of all Leases for premises and Leases of equipmententered into from August 2017 to-date;(c) Copies of lists of all current employees; and copies of all JobDescriptions of employees who commenced from or had JobDescriptions amended from August 2017 to-date;(d) Copies of all Directors' Resolutions from December 2016 to-date.[6] Clause 10:Monthly Each month a meeting will be held on the 6th working dayMeeting of the month. Date subject to change by prior agreement.The meeting is to provide information and be a focus for anoverall view of the company, and to document agreements.Minutes will be recorded at the meeting and goals anddecisions will be documented and prior meetings minutesdiscussed.At least 24 hours prior to the monthly meeting the followingwill be available to the meeting participants:Accurate monthly and annual YTD financials which reflectproper and accurate inventory recording.A monthly balance sheet.Listing of AR and AP with their payment dates.Cash flow for the current month and pro forma for the next6 months.A sales report in table form with a listing of major salesprospects, potential sales volumes and margins and a daterange (earliest to later) and a probability factor, this reportto be cumulative to provide sales history.Actual sales report by customer compared with budget.Report on IP protection progress.A brief operations report, on product development andmonthly goals and problem issues.At this meeting the amount of money to be advanced will bediscussed and agreed upon.Money will be advanced by the 10th working day of themonth. (Subject to the agreed upon maximum).Order sought:(A1) The First Defendant shall hold a monthly meeting on the 6th workingday of each month. Such meeting shall comply with clause 10 of the14 December 2016 Investment and Shareholder Agreement betweenthe parties.(A2) At least 3 working days' notice of such meeting shall be given toMichael Lookman, by email.(A3) Michael Lookman shall be entitled to attend in person, or byvideoconference or teleconference at the discretion of MichaelLookman. Michael Lookman shall be entitled to have a professionaladviser present at such meeting.(A4) Such meeting shall be held during usual business hours, and be heldat 71 Redwood Valley Lane, Richmond, or at some other venue ifagreed to prior by Michael Lookman.Summary judgment[7] Rule 12.2 of the High Court Rules provides that the Court may give judgmentagainst a defendant if a plaintiff satisfies the Court that the defendant does not have adefence to a cause of action in the statement of claim or to a particular part of any suchcause of action.[8] The onus lies on the plaintiff to prove this position. There is no onus on adefendant. Where the plaintiff's unchallenged evidence is sufficient to convince theCourt that there is no defence, the defendant will need to respond in order to defeatthe application, but the onus remains throughout on the plaintiff.2The agreement in more detail[9] The investment and shareholding agreement between the Trust and DesignElectronics is a contract for a five year period unless terminated earlier in accordancewith its provisions, and was entered after the Trust had lent Design Electronics sumsof money secured by promissory notes some six months earlier. It provides that theTrust will advance up to $2,100,000 progressively, at an interest rate of 10 per centafter the first year. The Trust and Design Electronics agreed that a budget for thebusiness of the latter would be developed and advances would be dependent oncashflow. The Trust was to provide a treasury function up until the end of December2017, and at its discretion would supervise accounting staff to ensure that relevantfinancial reports were produced on a timely basis. The electronic accounting system2 MacLean v Stewart (1997) 11 PRNZ 66 (CA).of Design Electronics, and its records, were to be available to enable independentaccess to statements, presumably financial. The Trust was to arrange bank financing.[10] The agreement provides for monthly meetings as can be seen from clause 10above. A personal guarantee was to be given to the Trust by Design Electronics, asclause 6 above shows. Security was provided for.[11] The agreement provides in clause 9:Shareholding All and any shares for sale will be offered to existingshareholders such that existing shareholders shall have apremeditate (sic) right to buy any shares offered.A Shareholders Agreement will be prepared by the Partiesprior to any shareholding changes and / or share optionsbeing exercised and causing a change in shareholding.The Lender has the right to purchase 51% of theshareholding at the share price of NZD 2,100,000. Thisshareholding purchase will be enabled through the issuanceby the Company of new shares.The option to purchase shares will survive for 3 (three) yearsfrom the date of the original funds advance of 8 May 2016.The statement of claim[12] The Trust pleads that although monthly meetings were held initially, andMr Lookman was provided access to documentation by means of a joint Dropboxaccount, in October 2017 Design Electronics and Mr Jones removed all documentsfrom that account. The Trust says that although it has continued to request thedocumentation it is entitled to under the contract, and electronic access to it, togetherwith the right to attend monthly meetings, this has not occurred. It says that despiterequests, documentation and information about progress on obtaining intellectualproperty protection for the sensing systems produced by Design Electronics have notbeen provided. The Trust says that as it has an option to purchase 51 per cent of theshares in Design Electronics, expiring on 8 May 2019, it requires ongoing access toDesign Electronics' documentation in order to make an informed decision as towhether to take up the option. It also pleads that under the agreement it is entitled tosupervise accounting staff and the electronic accounting system and records of DesignElectronics, but this is prevented.Summary of the evidence[13] In evidence Mr Lookman says that after the agreement was signed he wasprovided with Design Electronics' documentation, monthly meetings were held withhim and he made advances which now total $1.82m. However, by late 2017, he hadbecome concerned about what he saw as a lack of progress in obtaining intellectualproperty protection, and about the financial performance of Design Electronics, andits management by Mr Jones. He says that in late September Mr Jones removed hisaccess to the electronic accounting system and bank accounts, deleted all documentsfrom the shared Dropbox which had been set up, and prevented him from supervisingaccounting staff. Monthly reporting and monthly meetings ceased in October 2017.[14] Some documentation was provided in January 2018.[15] The last information the Trust has had on intellectual property matters was alsoin January 2018. Mr Lookman says that no patents have been applied for, nor havetrademarks. These are matters of concern to him because Design Electronics is"essentially a start-up technology enterprise" which does not hold any significant fixedassets. Protected intellectual property in the form of patents and trademarks relatingto its products are the ingredients of its business.[16] Mr Lookman says that part of the business of Design Electronics is theoperation of a wireless network, which is intended to connect Design Electronics withsensing equipment it has provided and which is in place on farms and other propertiesthroughout New Zealand. The ability for charges to be rendered to users for thisnetwork is a key source of income and, accordingly, a key asset of Design Electronics.He has a report dated 6 September 2017 stating the network has received interest fromnational companies willing to use it. The report provides projected income, and detailsof progress made by September 2017. In January 2018, however, when dealing witha Mr Hansen who acted for a short time as a financial adviser of Design Electronics,he was informed that the intended network was "being set up in a separate company".[17] Mr Lookman says that while Design Electronics is continuing to develop bothSenSys products and the network for their operation, and to market those products tosignificant entities in New Zealand and overseas, he remains short of information.Therefore, as the Trust has until 8 May 2019 to decide whether to take up the optionto purchase 51 per cent of the shareholding he needs ongoing information anddocumentation which he is entitled to be provided with under the agreement.Likewise, he is entitled to have monthly meetings, and is entitled to have a personalguarantee of Design Electronics' obligations.[18] Mr Jones says that throughout 2016 and part of 2017 Mr Lookman and he,together with his wife Karen Matthews, met monthly to discuss and review progressin product development, manufacturing, sales, customer negotiations and financialreports. Mr Lookman was included in visits, meetings with customers and staffinterviews. He was provided with management reports, product development reportsand financial reports generated from Design Electronics' accounting system includingcashflow forecasts and sale plans. This material was provided in advance of monthlymeetings and Mr Lookman was given access to a Dropbox account which maintaineda record of past reports.[19] In July 2017 there were discussions about the creation of a new networkcompany. According to Mr Jones, Mr Lookman proposed that he invest $1,000,000in this new entity but would be the majority shareholder. Mr Jones and Ms Matthewsdecided it was in the best interests of Design Electronics that it was the majorityshareholder in the proposed network company. This, Mr Jones says, seemed todisplease Mr Lookman. He thinks that this was a turning-point from which therelationship between he and Mr Lookman soured.[20] There was a further meeting on 7 August 2017 which Mr Jones says waslengthy and difficult. He says there was a complete change in demeanour on the partof Mr Lookman, which led to a character attack on him.[21] Over ensuing weeks there were a number of written communications whichspell out an acrimonious relationship. It is not necessary to review all this material orattempt to reach conclusions on which of the parties was right and which was wrongin the various contentions which were put forward. It is sufficient to note that late inSeptember Mr Jones cancelled a meeting that Mr Lookman was to attend at DesignElectronics' Wellington engineering base. The parties met on 26 September, andMr Jones says the outcome was that although Mr Lookman wanted access to companydocuments, Mr Jones was left with no certainty that Mr Lookman had any intention ofinvesting any more funds, and the impression he got was that Mr Lookman wanted totake over control of Design Electronics with Mr Jones no longer being involved.Shortly after that Mr Jones removed Mr Lookman's access to the electronic accountingsystem, bank accounts and documents in the shared Dropbox. This was reinstated fora time in an attempt to reach a compromise, but in October 2017 monthly reportingand monthly meetings ceased.[22] It is a matter of record that in November Mr Lookman issued a statutorydemand for repayment of funds he had advanced together with interest.Mr Lookman's use of this procedure for recovering his advances is the subject of thetwo former judgments of this Court referred to earlier. Mr Jones says that he has beenworking hard to get Design Electronics into a position where it can repay Mr Lookmanin full. He believes that Mr Lookman is not suffering any prejudice in the position heis presently in and:the reality is I cannot trust Mr Lookman, and based on his behaviour in thepast 12 months, including trying to liquidate [Design Electronics] I doubt hehas any intention of pursuing a working relationship with me going forward.[23] So far as intellectual property protection is concerned, Mr Jones says themajority of the intellectual property is "inside my head" and that he has been workingwith a patent and trademark attorney to secure intellectual property protection. Heconfirms, however, that a separate company has been established to develop thenetwork referred to above, though at this point no assets have been moved from DesignElectronics to develop this network.[24] Mr Jones concludes by saying that he does not believe there is any prejudiceto Mr Lookman if the orders now sought are not granted as he is continuing to receiveinterest each month. He says it is his belief that Mr Lookman is seeking to get accessto information which he has demonstrated by prior conduct that he will use to damageor potentially shut down Design Electronics.[25] In an affidavit in reply, Mr Lookman takes issue with a good deal of Mr Jones'evidence. Notably he says the intellectual property is Design Electronics', notMr Jones' and under clause 6 of the agreement, security over it is to be provided to theTrust. He takes issue with Mr Jones' version of events surrounding the possible settingup of a new company for the proposed network. He gives his own explanation of theevents of late 2017, which does not align with that of Mr Jones. He confirms, however,that he has now lodged in his solicitor's trust account $280,000 which is sufficient totake the Trust's full contribution to Design Electronics to $2,100,000, so it is clear thatthe Trust is in a position to make a further capital contribution to Design Electronicsby taking up shares in the company pursuant to its option if it elects to do so.Discussion[26] The contract between the Trust and Design Electronics is an executory contractwith rights and obligations on an ongoing basis. The term for which funds have beenand are to be advanced is yet to expire. The date by which the Trust may exercise itsoption to purchase shares is yet to be reached. Obligations intended to be compliedwith throughout the term of the contract are clearly ongoing, and have not beencomplied with. Arguably at least "proper and adequate IP protection" has not beenobtained by Design Electronics as required by clause 6. Nor, therefore, has securityover this level of protection been granted to the Trust. Ongoing obligations to holdmeetings and to provide information to the Trust have not been complied with. All theobligations on both the Trust and Design Electronics set out in the agreement remainon foot.[27] It is established that where a contract is to be performed in stages the Court canenforce performance of those obligations which have already become due, eventhough other obligations cannot be enforced because the time for their performancehas not yet arrived.3 Further, specific performance may be ordered of part of a contractwhich is to be performed in stages even if the contract contains obligations which arenot enforceable, provided they are not inter-dependent, though issues of hardship mayarise in this context and must be considered when deciding whether or not specificperformance should be ordered.43 Odessa Tramways Co v Mendel (1878) 8 Ch.D. 235; Langen & Wind Ltd v Bell [1972] Ch 685.4 See, generally, Gareth Jones and William Goodhart Specific Performance (2nd ed, Butterworths,London, 1996) at 58-60 and ICF Spry Equitable Remedies (9th ed, Law Book Company, Sydney,2014) at 99.[28] The defendants do not challenge the assertions made by the Trust that theyhave not complied with the obligations on them under clauses 6, 8 and 10 sinceapproximately August 2017. It is also clear on the evidence that there has been asignificant breakdown in the relationship between Mr Lookman and Mr Jones, andthus Design Electronics. The latter puts forward this breakdown as justification fornot having performed its contractual obligations. In my opinion that is not ajustification for acting as Design Electronics and Mr Jones have. This is a commercialcontract involving a significant sum of money and mutual material rights andobligations: the Trust has material contractual rights to which Design Electronicsagreed, and Design Electronics has had the benefit of funding from the Trust which itcontinues to enjoy and is not in a position to repay.[29] It is not pleaded by Design Electronics or Mr Jones that the Trust is in breachof the agreement by the actions of Mr Lookman which they maintain are responsiblefor the breakdown in the relationship between Mr Lookman and Mr Jones. The onlybreach of the contract pleaded in the notice of opposition is that the Trust is in breachby not having provided $2,100,000 of lending. There is not, however, any obligationon the part of the Trust to have provided that sum by now. Rather, it is clear fromclause 5 of the agreement that that is a sum to be advanced over time, and all but$280,000 has been advanced, notwithstanding that interest has been in arrears andcontinues to be in arrears at present.[30] Causing a breakdown in the relationship between the Trust and DesignElectronics – or more accurately Mr Lookman and Mr Jones – is not, even ifestablished, in itself a breach of contract. On the contrary, clauses 6, 8 and 10 reliedon in this case by the Trust place specific obligations on Design Electronics andMr Jones.[31] I therefore turn to the obligations in those clauses.Clause 6[32] Clause 6 refers in part to a "Personal Guarantee to the Lender from theCompany Director on behalf of the existing shareholders". The terms of the personalguarantee are not set out. Nor is there cross-reference to, for example, a standard form.In Honk Land Ltd v Fetherston, an agreement to lease was entered into with the word"Guarantor" and the name of a person next to it added to a standard form ofagreement.5 The named person signed as guarantor. The agreement provided that anAuckland District Law Society lease form would be executed, and that form doescontain a form of guarantee. However, no such document was ever signed. TheDistrict Court, the High Court on appeal, and the High Court again, on an applicationfor leave to appeal to the Court of Appeal, found that the terms of the agreement tolease were sufficiently clear in relation to the first six months of the term of theintended lease, so there was a valid guarantee for that period, but that there was noguarantee in relation to a longer term which had been intended to be the subject of theADLS lease form, even though there was a reference to that document in the originalagreement. The reference was to the effect that the terms of the guarantee would beno more onerous than those contained in the 3rd edition of that document. As Lang Jsaid:[47] The parties to the lease arrangement in the present case therefore neveragreed upon the terms of the formal lease. They did no more than agree thatthe terms of any such lease could not be more onerous than those contained inthe ADLS standard form. A lease document that excluded liability on the partof the guarantor after the expiry of the term of the lease remained in theory atleast a possible outcome. For this reason I agree with both Judge McElrea andFrater J that the terms of the formal lease remained uncertain and the appellantcould not establish that the terms of the ADLS 3rd edition commercial leasewere incorporated within the agreement to lease.[33] In Regan v Brougham, a finance contract contained a provision that if anyperson is named in the agreement as a guarantor, that guarantor must have signed adeed of guarantee and indemnity. There was no reference to any specific form ofguarantee. Simon France J said:6The Agreement clearly contemplates that any guarantee will be found in aseparate contract. Consistent with this, and unlike for both the borrower andany covenantor, there are no operative clauses within the document imposingany obligation at all on a guarantor. Nowhere it is said what the guarantor isagreeing to, nor when that obligation might arise. I acknowledge that with asimple term loan arrangement the nature and extent of a guarantor'sobligations may be easier to infer, but one would still expect clarity aroundmatters such as when the guarantee will be triggered and what notice isrequired. Further, I do not accept that a consumer protection requirement suchas s 27 of the Property Law Act 2007, which requires that a guarantee contract5 Honk Land Ltd v Fetherston HC Auckland AP-2005-404-7019, 30 April 2007.6 Regan v Brougham [2017] NZHC 1091 at [25].be in writing, is met by a document which merely describes a person as aguarantor and which is then signed by the guarantor. The essential terms of aguarantee contract must in writing and here they are not.[34] Counsel for Design Electronics advised that the Court of Appeal has grantedleave to appeal the judgment of France J in Regan v Brougham. Although thejudgment of the Court of Appeal is not available yet, the judgment granting leavecontains this passage:7[4] In particular, we note the loan agreement was a standard ADLS form andtherefore its construction is a matter of general importance. We note too theexistence of previous authority – not cited to Simon France J – which has heldthat when a person signs a loan agreement as guarantor, he or she can be takenas agreeing to guarantee something and that in the absence of words oflimitation, the natural and only reasonable inference is that they are agreeingto guarantee all the obligations of the principal debtor contained in thedocument. Further, the issue of whether and when equity can be invoked toovercome the effects of non-compliance with s 27 is a novel one.[35] The reference to s 27 is to that section of the Property Law Act 2007 whichrequires a contract of guarantee to be in writing and signed by the guarantor.[36] The authority referred to is Bradley West Solicitors Nominee Co Ltd vKeeman.8 Tipping J discussed a variation of mortgage document signed by fourpersons next to the word "Guarantors". It also contained a clause saying those personshad executed the document as guarantors. No other terms of guarantee were includedin the document. His Honour said:9The document as a document either constitutes a valid guarantee or it doesnot.The question becomes whether the document itself evidences with sufficientclarity an intention on the part of the purchasers to guarantee the nomineecompany mortgage.[37] There is sufficient doubt raised by Design Electronics in this case to lead meto the conclusion that the Trust has not, in relation to clause 6 of the agreement,established that there is no defence to its application for summary judgment grantingspecific performance pursuant to this clause. The agreement in this case is not a7 Regan v Brougham [2018] NZCA 157.8 Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC).9 At 116.standard form agreement and there is no reference to the terms of the guarantee thatmight have been intended. This is a matter which may be the subject of oral evidenceat a trial in accordance with the principle applied in Bradley West v Keeman.[38] The document simply states "a Personal Guarantee to the Lendor from theCompany Director on behalf of the existing shareholders". It is not clear from thissentence whether the shareholders are to be liable or just the company director. Thereare two shareholders, one of whom is the director, Mr Jones. Neither shareholder isnamed as, or signed as, a guarantor. The agreement is only executed by DesignElectronics, with signatories for that company being described as Warwick Jones,Director and 50% shareholder, and Karen Matthews, 50% shareholder.[39] In my opinion the question whether any guarantee, and if so the terms of thatguarantee, are enforceable against Mr Jones are matters for trial.[40] The force of the point is exemplified by the fact that attached to the statementof claim is a draft form of Deed of Guarantee and Indemnity which, from the name onthe front cover of it, appears to have been prepared by Mr Lookman's solicitors. It isa detailed 10-page document. There is no evidence before the Court that there hasever been even discussion of Mr Jones and/or Ms Matthews signing a document inthese terms, let alone agreement to do so.Clause 8[41] The sole obligation on Design Electronics in clause 8 is contained in the thirdsentence, albeit expressed in passive rather than active terms. I am satisfied that it issufficiently clear that it casts an obligation on Design Electronics. That obligation,however, is to make available its electronic accounting system and records, to theextent necessary to enable independent access "to statements".[42] The orders sought are considerably more extensive. The order sought inparagraph B1 sufficiently mirrors the obligation in clause 8 of the agreement to be areasonable foundation for an order though with the addition of the words "andrecords". Whilst the terms of paragraphs B2, B3, B4 and B5 might refer to materialwhich Mr Lookman would like to have (and arguably should have contracted toreceive) and indeed might refer to material that he once did receive, they are welloutside the terms of clause 8 of the agreement, and that clause cannot, at least on asummary judgment application, be interpreted to place any obligation on DesignElectronics to act as the order predicates. I accept that some of the documents referredto might well be within Design Electronics' "electronic accounting system", and thuscome available to Mr Lookman by virtue of an order giving him access to that inaccordance with the obligation on Design Electronics contained in clause 8. However,the order of the Court can only be to comply with the express contractual obligation.I accept that the obligation has existed since August 2017 so the access provided mustbe to all material on the electronic accounting system from that date to the present timeand is, as well, an ongoing obligation for the term of the contract. Any further or wideraccess is an issue for evidence at trial.Clause 10[43] The obligations imposed on Design Electronics by clause 10, while expressedin abbreviated language, are in my opinion sufficiently clear for the Court not to beleft in any real doubt or uncertainty about what was intended. The first three sentencesprovide for a monthly meeting on a specified date which may be changed byagreement, for information to be provided which will be a focus for an overall viewof the company, and for the purpose of documenting agreements that need to be made.The last two sentences refer to advances by the Trust. The remainder of the clauseplaces obligations on Design Electronics to provide specified information anddocuments at least 24 hours prior to the monthly meetings.[44] One argument advanced by Ms Jamieson was that the Court should not orderspecific performance of any terms of the contract because the terms by their nature aresuch that Court supervision of compliance would be required. In relation to theobligations placed on Design Electronics in clauses 8 and 10, I do not agree. Theterms of the obligations are sufficiently clear, and on the evidence of DesignElectronics itself the obligations have been complied with up until August 2017.[45] Ms Jamieson also argued that the fact that Mr Lookman had issued a statutorydemand under s 289 of the Companies Act 1993 disentitles him to an order for specificperformance. Again, I do not agree. Whilst for reasons already canvassed by thisCourt in its judgment dated 2 May 2018,10 proceedings based on that demand couldnot proceed, Mr Lookman's actions can be interpreted as an attempt by him to bringmatters to a head given that he had invested $1.82m in a company which was obligedto provide him with certain information and to take certain material steps, and hadceased to do so. I do not regard the issuing of the demand as conduct material to theCourt's discretion in relation to ordering specific performance, in the circumstancesof this case.[46] Ms Jamieson argued that damages would be an adequate remedy if DesignElectronics is found to be in breach of contract. I do not agree. The evidence givenfor Design Electronics by Mr Jones is that Design Electronics is not even in a positionto repay Mr Lookman's advances, which strongly suggests that it could not meet adamages claim. Mr Jones does not give any evidence indicating to the Court that hewould be in a position to meet a damages claim either.[47] Finally, Ms Jamieson notes that Mr Lookman says the reason he seeks specificperformance is to enable him to determine whether to invest the balance of the sum of$2.1m in Design Electronics and exercise its share option. She notes that clause 9 ofthe agreement provides that prior to any shareholding changes and/or shareholdingoptions being exercised, a "Shareholders Agreement" will be prepared. She says thatin light of the matters set out in the evidence presently before the Court there has tobe real doubt as to the ability of the parties to agree the terms of any such shareholders'agreement and a real possibility that issues between these parties will be back beforethe Court in the near future.[48] Whilst I can understand the basis upon which Ms Jamieson makes thatsubmission, the unhappy state of the relationship between Mr Lookman and Mr Jonesbeing described by both of them, the Trust and Design Electronics nonetheless remaincontractually bound, and both must perform all obligations imposed on them by thecontract whilst that remains the position. If clause 9 imposes on them an obligation toprepare a shareholders' agreement, both are obliged to take such steps as may be10 Lookman v Design Electronics Ltd [2018] NZHC 904. This judgment was re-issued on 15 May2018.necessary to comply with the obligation that each has. I say "if" because the clausemay be susceptible to argument that it is void for uncertainty, or it may be arguablethat the provisions relating to disputes in clause 12 will need to be invoked, andpromptly so. On these points I do not express an opinion, and refer to counsel'sobservation only to emphasise the importance of both parties to the agreementensuring that they honour their respective obligations including, if necessary, suchobligations as may be imposed on them by clause 12. If Mr Lookman, a trustee, andMr Jones, a director, believe themselves to be unable to act in the best interests of theTrust and Design Electronics respectively, they may need to consider standing asidein favour of persons who can.Outcome[49] I am satisfied that the Court should enter summary judgment for the LookmanTrust on part of its claim by making orders for specific performance in the followingterms:(a) Design Electronics Ltd will forthwith provide access to the LookmanFamily Trust to its electronic accounting system and records from 1August 2017 and will continue to provide such access.(b) Design Electronics Ltd will comply in every respect with the obligationsimposed on it by clause 10 of the agreement between it and the LookmanFamily Trust dated 14 December 2016. All information required by thatclause to be made available will include information for the periodAugust 2017 to the end of the month before the first meeting followingthis judgment.[50] In all other respects the application for summary judgment is dismissed.[51] Costs are reserved.[52] The proceeding is adjourned to a case management conference to be arrangedafter 1 February 2019._______________________J G MatthewsAssociate JudgeSolicitors:McFadden McMeeken Phillips, NelsonTavendale and Partners, Christchurch