REDEAL LIMITED TRADING AS REXEL ELECTRICAL SUPPLIES NEW ZEALAND LIMITED HC AK CIV2006-404-7534

REDEAL LIMITED TRADING AS REXEL ELECTRICAL SUPPLIES NEW ZEALAND LIMITED HC AK CIV2006-404-7534 7 December 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV2006-404-7534BETWEEN REDEAL LIMITED TRADING AS REXEL ELECTRICAL SUPPLIES NEW ZEALAND LIMITED Plaintiff AND A J LINSTROM First Defendant AND S G BRYANT Second Defendant AND S B WILLIAMS Third Defendant Hearing: 27 August 2007 Appearances: N R Hall for Plaintiffs G Armstrong for First Defendant D Chesterman for Second Defendant No appearance for Third Defendant Judgment: 7 December 2007 at 3.30 pmINTERIM JUDGMENT OF ASSOCIATE JUDGE H SARGISSONThis judgment was delivered by Associate Judge Sargisson on 7 December 2007 at 3.30 pm pursuant to Rule 540(4) of the High Court Rules Registrar/Deputy RegistrarDate:Solicitors: Simpson Grierson, Private Bag 92518, Auckland Armstrong Murray Solicitors, PO Box 33-1028, Takapuna[1] The plaintiff, which trades as Rexel Electrical Supplies New Zealand Limited, seeks summary judgment against the first and second defendants, Mr Linstrom and Mr Bryant, for the full amount of its claim of $706,988.68 together with interest and costs. [2] Rexel's claim arises out of a demand for payment for electrical goods it says it supplied under two separate accounts over the period March 2006 to November 2006 to Future Electrical Limited. It says the overall sum is made up of sales of $345,173.08 debited to Future Electrical's trading account number 52608 between 31 March 2006 and 10 November 2006 and sales of $361,815.60 debited to Future Electrical's trading account number 54419 between 12 April 2006 and 10 November 2006. [3] Future Electrical was placed into voluntary liquidation on 31 October 2007. The two accounts have not been paid and Rexel contends that Mr Linstrom and Mr Bryant are liable personally under a written guarantee they signed when they were directors of Future Electrical, and it is looking to them for payment. [4] Summary judgment has already been entered on the claim on an unopposed basis against the third defendant, Mr Williams, who was one of the three directors of Future Electrical. Mr Williams has since been adjudicated bankrupt. However, Mr Linstrom and Mr Bryant do not accept that they are liable under the guarantee. Consistent with the Court's finding in Auckett v Falvey HCWN CP296/06 20 August 1986 Eichelbaum J, they accept that Future Electrical has outstanding debts to Rexel and that in general terms Rexel has adduced the relevant documentation to prove its claim under the guarantee on a prima facie basis. However, they say they have raised tenable defences as to both liability and quantum. I proceed on that basis. [5] It is common ground that under r 136(1) of the High Court Rules a plaintiff has the onus of satisfying the Court that the defendant has no defence to the plaintiff's claim, or to a particular part of the claim. See: Pemberton v Chappell[1987] NZLR 1, 3. However while ultimately the onus rests on the plaintiff to show there is no defence, the circumstances may cause the evidentiary onus to shift to the defendant: Auckett v Falvey. If the defendant satisfies that evidential onus theplaintiff must show the defence is not genuinely arguable if it is to have summary judgment: Pemberton v Chappell at 3. If the plaintiff does not discharge the onus, the claim (or relevant part) must be determined at trial in the normal way. [6] The broad issue for determination in this case is whether or not each defendant has raised a possible defence as to liability and/or quantum and provided an evidential foundation for it. If he has, the further issue for determination is whether Rexel has shown that the defence is or is not genuinely arguable. [7] Both defendants raise the defence of non est factum to defeat liability under the guarantee. They say they did not consent to the guarantee. Mr Bryant also raises some additional defences, including a defence of unconscionability. Both challenge quantum.Background[8] In February 2002, Rexel entered into a written supply agreement with Future Electrical in which Rexel agreed to supply, and Future Electrical to purchase, goods in accordance with Rexel's terms and conditions of sale. The supply agreement signalled Rexel's requirement for personal guarantees by the directors of Future Electrical. [9] All three defendants were directors of Future Electrical at that time. It is Rexel's contention that in April 2002 it entered into a separate written guarantee with all the directors of Future Electrical in which all three agreed to jointly and severally guarantee payment of all monies Future Electrical owed to it then and in the future. [10] The guarantee comprises of two pages. The first page provides:a. I/We hereby jointly and severely personally guarantee to the Supplier payment for monies owed now and in the future by the Customer to the Supplier for the supply of goods. b. This deed shall be a continuing guarantee to the Supplier for all debts whatsoever and when so evercontracted by the Customer with the Supplier in respect of goods supplied to it. c. The Supplier shall be at liberty without notice to Me/Us at any time and without in any way discharging Me/Us from any liability hereunder to grant time or other indulgence to the said Customer and to accept payment from it in cash or by other means and to treat Me/Us in all respects as though I/we were jointly and severely liable with the Customer to the Supplier instead of merely surety for it. d. The Guarantor will Upon Demand pay to the Supplier all or any of the Guaranteed Monies which are not paid by the Customer to the Supplier as and when they are due. e. As a separate and additional liability under this Guarantee, the Guarantor indemnifies the Supplier in respect of such of the Guaranteed Monies as the Supplier is not or may not be able to recover from the Guarantor on the footing of a trustee for any reason and as principal debtor agrees with the supplier to pay for the account of the Supplier Upon Demand if sum equal to the amount as such monies. f. Although as between the customer and the Guarantor the liability of the Guarantor to the Supplier may be that of a surety only nevertheless as between the Guarantor and the Supplier the liability of the Guarantor shall be deemed to be the liability of a principal debtor and such liability shall not be affected or diminished, nor shall any Security indemnify or Right collateral to this Guarantee be released or discharged by any of the matters mentioned in this Guarantee or by other act, indulgence, omission, matter or thing which but for this clause would have operated to release the Guarantor wholly or partly from its liability as a surety only under this Guarantee. g. This Guarantee shall be a principal obligation and shall be treated as in addition to and not in substitution for a collateral to any other Security. Indemnity or Right which the Supplier may have now or at any time in the future in respect of the Guaranteed Monies.[11] The guarantee, produced by Rexel, is signed by all three directors. [12] Mr Bryant withdrew as a director and shareholder of Future Electrical in 2005. He entered into an indemnity agreement with the then remaining directors, MrWilliams and Mr Linstrom. Mr Linstrom withdrew as a shareholder and director of Future Electrical in July 2006. He also entered into an indemnity agreement with Mr Williams, but otherwise terminated his association with Future Electrical. Both Mr Bryant and Mr Linstrom set up their own business ventures after they left Future Electrical. [13] Future Electrical went into voluntary liquidation on 31 October 2006. Rexel contends that as at the date of liquidation, Future Electrical owed it the full amount of its claim, $706,988.68. Rexel contends that since the date of liquidation no payments have been made to reduce that debt. By letter dated 8 November 2006, Rexel made demand on the defendants for $702,492.75 pursuant to the guarantee. According to Rexel the difference between that sum and the amount of the claim is for further goods Future Electrical purchased after the date of the letter of demand. In support, Rexel has produced copies of the transaction ledgers for the two accounts for the period March to November 2006. [14] Importantly, Rexel has not explained the basis on which it claims for goods it says that Future Electrical purchased after the date of liquidation, which resulted in additional debits after the date of liquidation of approximately $4,000.00. I proceed on the basis that the supplies made on these purchases are outside of the claim, and that the claim is for the lesser amount of $702,492.75 referred to in the letter of demand.Summary judgment principles[15] Rule 136 (1) states:136 Judgment where there is no defence or where no cause of action can succeed.(1) The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to the claim in the statement of claim or to a particular part of any such claim.[16] If no credible evidential foundation is provided by the defendant for the defences raised then the plaintiff's verification ought to be accepted unless it ispatently wrong: Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54, 59. [17] Simple assertions by a defendant in an affidavit in opposition are insufficient to raise an arguable defence, particularly where those assertions are inconsistent with proved documents and lack credibility: Bishopdale Developments Ltd v Lincoln Turner (NZ) Ltd (1990) 4 PRNZ 584. [18] In Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA), 85-86, Cooke P summarised the situation by stating that: the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. In the end it can only be a matter of judgment on the particular facts.[19] In the words of Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331 at 341 E, the Judge is not bound:to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.[20] However, the importance of the plaintiff's overall onus cannot be over emphasised. In this respect, it is worth mentioning the Privy Council's recent decision in Jones v Attorney-General [2004] 1 NZLR 433 approving a passage fromWestpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) wherein Elias CJ said:[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded by the affidavits. It may also be inappropriate where the ultimate determination depends on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated proceedings and affidavit evidence will sufficiently expose the facts and legal issues ...[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary judgment procedure the sufficiency of the proof of the plaintiff's claim. [21] The decision makes clear how important it is that the plaintiff provides sufficient proof of its claim.The Defences[22] Although Mr Linstrom raised a number of grounds of defence in his Notice of Opposition including a defence based on a cross-claim against Mr Williams, at the hearing the defences that Mr Armstrong advanced on his behalf were limited to essentially two defences. They can be summarised as follows: a) The defence of non est factum. This defence was advanced on two separate bases: i) First, that although Mr Linstrom signed page 2 of the guarantee he did not sign in the sense of consenting to the guarantee because the first page of the guarantee was not put before him. The first page contained the essential terms of the guarantee at paragraphs (a) – (g). As it was not put before him he cannot be taken to have signed or consented to the terms. ii) Alternatively, if both pages of the guarantee were in fact put before him, which he denies, and he therefore did sign it, he was misled as to its contents and was not told or aware that it created any personal contingent liability on his part. b) Secondly, in any event he has a genuine defence as to the quantum of Rexel's claim. His liability cannot exceed the amount of $500,000.00 and may be less. [23] Mr Bryant does not deny signing the guarantee but he says he has several defences. The defences advanced at the hearing can be summarised as follows:a) Non est factum. Unlike Mr Linstrom, Mr Bryant did not argue that the first page of the guarantee was not put before him when he signed the second page. He advanced the defence on the basis that he was not aware he was signing a personal guarantee as he did not read the document when he signed it but that he relied on Ms Williams who led him to believe it was not a personal guarantee. b) Misrepresentation by Rexel's agent. Alternatively, Ms Williams procured his signature on behalf of and as agent for Rexel. She misrepresented that what he was signing was not a personal guarantee. This supports defences under the Fair Trading Act 1986 and the Contractual Remedies Act 1979. c) Unconscionable bargain. A defence is available based on the equitable doctrine of unconscionable bargain. Mr Bryant relied on his resignation as a director of Rexel in 2005 and Rexel's knowledge about of his resignation. He also argued that Rexel knew that he had ceased to be associated with Future Electrical when the invoices were raised, and that he has been trading under a separate entity since 2005. In addition he contends the guarantee is harsh and oppressive because it contains no limits on his potential exposure as a guarantor and gives him no express right of termination. He argues that these factors support a defence of unconscionable bargain. d) Quantum. If he is liable on the guarantee, which he denies, he has a genuine defence as to quantum. [24] At the hearing counsel for Mr Bryant abandoned a further defence based on a complete indemnity from Mr Williams and Mr Linstrom. He accepted that this is not a defence to this proceeding and did not pursue it. However, in a memorandum filed subsequent to the hearing, counsel raised the indemnity again as a reason for deferring summary judgment. He argued that the issue of the indemnity to be raised in the context of this proceeding. I deal with the point later in this judgment.Have the first and second defendants raised a possible defence?[25] I deal first with the defence of non est factum.Non Est Factum DefenceLegal Principles[26] The plea amounts to a denial of consent to the transaction that would otherwise be evidenced by a party's signature to a document. In the contractual setting this means a denial of the creation of the contract which the writing appears to evidence. See Burrows, Finn and Todd Law of Contract in New Zealand (3rd ed, 2007) at 10.6.2(a), where the authors also note that, as a matter of general principle, a defendant who asserts an arguable defence based on the plea of non est factum has a heavy burden of proof to discharge in order to establish that he executed the document under some mistake and not as a result of his own carelessness. [27] As to the requisite degree of care, Burrows, Finn and Todd set out at 10.6.2(c):While it may not be possible to categorise the situations that will, or will not, amount to a lack of care sufficient to debar the signatory from successfully raising the plea of non est factum, it can be said that any person of full age and competence who fails to make some personal effort to determine the effect of the document to be signed will normally have failed to display the requisite care.Low v Swanson (1998) ANZ ConvR 338, 345 is cited by way of example. [28] The learned authors go on to say:... The same principles apply where a person signs a document knowing it contains blanks which the other party will fill in.United Dominions Trust v Western [1976] QB 513 is cited as authority.[29] The authors note at 10.6.2(a) that the doctrine although previously restricted to the illiterate or blind" has, on occasion, been extended to the situation where an educated person, to whom no negligence is attributable, has failed to scrutinise whathe or she has signed. They go on however to note that the judiciary is now agreed that the plea must be confined within narrow limits. They say:This can be seen as a matter of general policy – commercial convenience and practice requires that third parties must often rely upon the authenticity of signatures on their documents; their confidence in doing so is not lightly to be impaired.Mr Linstrom's case as to non est factum [30] The alternative bases Mr Linstrom advances for the defence require consideration of his evidence. Mr Linstrom acknowledges that his signature is on the signature page of the guarantee and that the wife of Mr Williams, Sandy Williams, who was the accountant of Future Electrical at the time, witnessed his signature. However he contends that at no time was he aware that he had executed a personal guarantee and did not know that Rexel believed it held a personal guarantee from him until 8 November 2006 when he received a letter of demand. He deposes:The guarantee ... was never drawn to my attention as a guarantee. I note it is not dated. I do not recall signing it as a separate document from what I understood to be a supply contract .... However, I do recall that, early on after we started trading, Sandy Williams advised we had a contract for the supply of materials that the plaintiff required signed before it would agree to supply. I acknowledge my signature where it appears on that document and on the signature page of the document headed "Guarantee". However, I do not ever recall seeing the first page (headed "Guarantee") of that document. I did sign the second page and wrote my name and, notably, my position as a director of the company underneath my signature. I can only conclude that I understood that what I was signing when I signed that page was a supply contract on behalf of the company, as that is the only document I ever recall was required by the plaintiff. My signature was witnessed by Sandy Williams who has signed as a witness under her maiden name, Driver. However, I do not believe that the page containing paragraphs (a) to (g) was ever put before me. The hand-written part at the top of that page was not completed by me. Accordingly, when I received the Plaintiff's letter of demand in November, I contacted the Plaintiff's National Credit Controller, Jan McIntyre and advised that I had never provided them with any guarantee as alleged. She advised me that the Plaintiff held such a document, and at my request sent me a fax attaching the document. I advised Jan McIntyre that if, contrary to my clear recollection, I had signed such a document, I was in any event indemnified by Mr Williams. [Emphasis added][31] In an apparent attempt to reinforce his claim that the guarantee lacked his consent, Mr Linstrom deposes that Rexel did not invite him to take legal advice about the documents it sent for signing or ever advise that he was required to sign a personal guarantee. He also says that the three directors agreed when they set up Future Electrical that none of them would take on personal liability, and that all attempts by other parties to have them sign personal guarantees were resisted. He says he was not involved in the administration of the Future Electrical as he was an electrician involved in the company's hands-on contract work and was not involved in the management of the paper work which was Mr and Ms Williams' responsibility. [32] Mr Armstrong submitted that Mr Linstrom's belief that the first page of the guarantee was never put before him is key to the defence. He recognized that submitted that Mr Linstrom's signature is on the signature page of the guarantee where Mr Linstrom has also noted his name and position with the company under the printed description guarantor in the text. However, he submitted that these factors do not establish liability if it is ultimately found as a fact that the first page of the guarantee was not placed before Mr Linstrom and he did not see it. He went on to submit that even if it is ultimately found that the first page was put before Mr Linstrom, it is possible that Ms Williams misled Mr Linstrom about its nature and contents. [33] Mr Armstrong pointed out that there is no evidence contradicting Mr Linstrom's assertion that he did not sight the front page of the guarantee or was not told what was in the guarantee and that neither side has produced evidence from Ms Williams to contradict him. [34] Mr Armstrong submitted that in these circumstances the clear inference is that Mr Linstrom was not in fact given the front page of the guarantee or that he was misled. He argued that Mr Linstrom must have an arguable defence based on the fact that he simply signed the signature page of the guarantee, believing it to be part of another document. He submitted that Mr Linstrom ought to have the opportunity to subpoena Ms Williams to appear at trial to be examined on the question whether she put both pages of the guarantee before him and what she told him. He also arguedthat Mr Linstrom's explanation of the circumstances in which he signed the signature page of the guarantee is credible and is consistent with Mr Bryant's evidence. [35] Ms Hall submitted for Rexel that Mr Linstrom's statement of belief and his purported recollection of events relating to the guarantee should be rejected as improbable and implausible. [36] I agree with Ms Hall's submission. Mr Linstrom's purported belief that the page of the guarantee containing the terms was never put before him falls into the category of improbable and implausible evidence that the Court is not obliged to accept uncritically as raising a dispute of fact. Mr Linstrom's advice to Ms McIntyre, Rexel's National Credit Controller, that if contrary to his recollection he did sign a guarantee then he has an indemnity from his former co-directors, points to his own recognition that his purportedly clear recollection cannot be treated as reliable. More significantly, there are other factors that show Mr Linstrom either sighted the entire guarantee or was, at the least, aware that he was signing a guarantee that attracted personal liability for Future Electrical's outstanding debts to Rexel. [37] The first factor is the contents of the supply contract itself. It clearly sets out in printed type, on its signature page, terms and conditions that include a term that records that the signatories agree to provide directors' personal guarantees should Rexel require them. The agreement also signals in an express note on the front page that the directors are required to provide personal guarantees where the customer's paid up capital is a nominal amount. The first page of supply contract then clearly records that the paid up capital of Future Electrical is $600.00, a nominal amount. Given these contents, the signatories were very much on notice that personal guarantees would, and not might, be required. Clearly, it was on that very basis that the directors obtained the benefit of the supply contract for Future Electrical. [38] The second factor is that Mr Linstrom was a signatory to the supply contract. Mr Linstrom recalls signing the supply contract. He has acknowledged his agreement to its terms by signing the signature page and makes no claim not to have understood any part of the supply contract. He clearly intended to be bound by it.[39] The third factor is Mr Linstrom's acknowledgement that he also signed his name and printed his position as director on page two of the guarantee in the space above printed type which states clearly:"Please print name of Guarantor". [Emphasis added]There is nothing ambiguous or confusing about the status of the signatories. Mr Linstrom could not avoid seeing that he was signing as guarantor. If he did not have or see the front page of the guarantee he could have obtained it or seen it with little or no real personal effort. If he did not fully acquaint himself with the full import of the guarantee, then that clearly points to carelessness on his own part. [40] A yet further factor is that Mr Linstrom was clearly alert to the consequences of a personal guarantee. He claims, in effect, he was normally careful to the point of assiduousness to avoid the liability attaching to a personal guarantee. If that was so, then it is inconceivable that he would sign a document noting him as guarantor rather than rejecting it if he did not intend to be bound by it. [41] Another factor should also be borne in mind. Mr Linstrom failed to provide any plausible explanation to support his purported belief when he signed the second page of the guarantee he thought he was signing a supply contract. In effect, what he is inviting the Court to accept is that he believed he signed the one and only supply contract not once but twice, without giving any plausible explanation to support why he would he would need to sign the supply contract twice. [42] It is implausible in the circumstances for Mr Linstrom to suggest he would sign the signature page of a document as a guarantor when an essential page was not put before him. The irresistible inference is to the contrary. Even if one were prepared to assume the improbable did occur so that the front page was not put before him, there is no credible basis for his assertion that he did not know what he was signing. There would, in the circumstances, be only one reason for his signing as guarantor. That reason could only because he knew he was signing a personal guarantee and was content to rely on Ms Williams to deal with the fine print.[43] The result either way is that he is debarred from relying on the plea of non est factum. His situation is little different that of a person who signs a document containing gaps which he knew the other party would fill in. and it is analogous to the situation referred to in Low v Swanson and United Dominions Trust v Western. [44] In reaching this view I have not overlooked the various factors Mr Linstrom has raised to cast doubt on whether he saw the first page of the guarantee and/or to show he misunderstood what he was signing, including that he was merely an electrician and that Rexel did not suggest that he get legal advice. There is no room however for attributing to Mr Linstrom some excusable misunderstanding about the significance of his signing a guarantee. His own evidence points to his having a clear understanding of the implications of signing a guarantee, and that he was a businessman with the confidence and acumen not only to act as a director of Future Electrical but to go on to set up his own business. Further, Rexel was under no duty to suggest that Mr Linstrom obtain legal advice. A creditor or person receiving a guarantee is under no duty to explain the meaning and effect of a guarantee or to advise the guarantor to obtain legal advice: Shivas v Bank of New Zealand [1990] 2 NZLR 327; Small v Currie (1853) 2 Drew 102; 61 ER 657; Bowkett v Action Finance Ltd [1992] 1 NZLR 449; Barclays Bank plc v Khaira [1992] 1 WLR 623. If Mr Linstrom had reservations about signing as guarantor, there was no impediment to his seeking legal advice. It can only be assumed that he did not choose to. [45] Another factor counsel for Mr Linstrom raised was that Mr Linstrom's claim that he did not see the first page of the guarantee is supported by Mr Bryant's evidence. There is however nothing in Mr Bryant's evidence that supports Mr Linstrom's claim to that effect. There is nothing in Mr Bryant's evidence that suggests Ms Williams did not put the whole guarantee before him. [46] Mr Linstrom also pointed out that the guarantee was not dated. Evidence given on behalf of Rexel is that the guarantee was entered into in April. In fact, the facsimile details recorded on the copy of the guarantee that Rexel produced in evidence indicate that the guarantee was signed in early March. However no real issue was taken over this evidence and I do not think anything turns on it.[47] In short, I agree with Ms Hall that it must have been obvious to Mr Linstrom not only that Rexel required a personal guarantee from him but that when he signed page two of the guarantee he could only have believed that he was signing the guarantee. I reject as not credible Mr Linstrom's the assertion that he believed the terms of the guarantee were never put before him but if I am wrong about that there is in any event no plausible evidential basis for Mr Linstrom's alternative assertion that he executed the guarantee under some mistake which satisfies the essential elements of the defence of non est factum. [48] It follows from the above findings that I reject both bases for the non est factum defence. On the evidence the essential elements of the defence cannot be made out. There is no occasion therefore for saying that it would be unjust to deny him the opportunity to set up a defence on the basis of his evidence.Mr Bryant's non est factum argument[49] Mr Bryant raises a similar argument to Mr Linstrom that it would be unjust to deny him the opportunity to set up a defence based on a plea of non est factum, although, as I have noted, he acknowledges that he did in fact sign the guarantee. A key factor in his argument is that Ms Williams led him to believe he was not signing a personal guarantee. He deposes:Sandy Williams would organise any paperwork or account matters that required the signature of the directors. Sandy Williams would simply give me any documents I needed to sign as a director. I never read these documents, nor were these documents explained to me, nor was I given an opportunity to seek legal advice. I was specifically told by Sandy Williams that she always looked over the documents we were signing and ensured we were not entering any obligations personally. She said she would cross out any references to personal obligations. Had I known I was being asked to sign a personal guarantee, I would not have signed this document.[50] I reject the submission made on behalf of Mr Bryant that his evidence indicates that his reliance on Ms Williams met the requisite degree of care. I accept Ms Hall's argument that there is no plausible evidential basis for Ms Bryant's assertion that he executed the guarantee under some mistake without carelessness on his own part. His evidence that he never read documents presented to him forsigning demonstrates at best, patent carelessness. It does not relieve him of the responsibility any reasonable director would accept to satisfy himself what he was signing. [51] Like Mr Linstrom, Mr Bryant signed and accepted the supply contract, and that put him squarely on notice about the need for a personal guarantee. He also signed the second page of the guarantee and printed his name on the space marked"Please Print name of Guarantor". If as he asserts he did rely on Ms Williams when signing, that was an election he made for reasons of convenience pertaining to internal management of Future Electrical. It does not provide any foundation for establishing, as against Rexel, that his misunderstanding was not due to his own negligence. In Saunders v Anglia Building Society [1971] AC 1004 at 1027 Lord Wilberforce said:.... the correct rule is that ... a person who signs a document and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs .... I would add that the onus of proof in this matter rests on him, ie to prove that he acted carefully and not on the third party to prove the contrary.[52] Given Mr Bryant's acknowledgement that he did not bother to read the guarantee but was content to sign it and given that he was clearly content to allow Ms Williams to take responsibility for communicating with Rexel about it, the defence of non est factum is not open to him. [53] Indeed, it would run directly counter to the policy limits of the defence to find otherwise.Conclusion – non est factum[54] For the above reasons, I am satisfied that neither Mr Linstrom nor Mr Bryant has raised an arguable defence based on non est factum. [55] I turn next to the additional grounds raised by Mr Bryant as to liability.Is there an argument in misrepresentation?[56] Mr Bryant advances an alternative argument under on the Fair Trading Act and the Contractual Remedies Act to the effect that he was induced to sign the guarantee by Ms Williams in her capacity as Rexel's agent and that he did not know it was a personal guarantee. He relies again on the same facts that any direct dealings with Rexel, that Ms Williams provided the documents to him and that he did not read the documents but relied on Ms Williams' assurance that she would ensure that the documents did not create any personal liability. [57] Counsel for Mr Bryant placed reliance on Citibank Savings Ltd v Nicholson(1997) 70 SASR 206 in submitting that there was an agency relationship between Ms Williams and Rexel. At 226 Perry J said:There is a long line of cases in which the court has held that where a creditor entrusts the debtor with security or guarantee documents with a view to the debtor procuring the execution of them, the court will construe the situation as giving rise to a species of agency, so as to hold the creditor responsible for any misrepresentation or undue influence brought to bear by the debtor towards the third party [58] I accept Ms Hall's submission that an agency relationship does not arise merely because a director is asked by a creditor to obtain the signature of a co- director to a guarantee. In Benchmark Building Supplies v Weatherby (CA 278/00 19 July 2001) Gault J said at [25]:As between co-directors and shareholders there is little room for attributing to a company creditor alertness to a likely relationship of trust and confidence such that misrepresentations between them should be guarded against.[59] Ms Williams was not a director of Future Electrical. However, as the accountant sharing responsibility for the administrative affairs of Future Electrical she was in a similar position and the same principle applies. Further, there is nothing in the evidence that justifies any room for attributing to Rexel a need to guard against misrepresentation between Ms Williams and the directors of Future Electrical or that indicates a relationship where the creditor ought to have been alert to the possibility of undue influence over the directors by Ms Williams. There is also nothing in the evidence that points to any arguable possibility that Ms Williams wasacting as agent for Rexel. There is not the slightest hint of her having actual or ostensible authority to act on Rexel's behalf. [60] Even assuming Mr Bryant was misled by Ms Williams into believing that the guarantee attracted no personal liability, no tenable basis has been raised for the contention that liability is attributable to Rexel. If as Mr Bryant asserts, he relied on Ms Williams and she misled him, that may mean Mr Bryant has a cause of action against her, but it does not give rise to a potential action against Rexel. [61] For the above reasons, I am satisfied that Mr Bryant has not raised an arguable defence based on misrepresentation by Ms Williams in her alleged capacity as Rexel's agent.Is the contract arguably oppressive?[62] Mr Bryant submits that he has an arguable defence that the guarantee was harsh and oppressive and therefore an unconscionable bargain. [63] Mr Chesterman relied on a passage from the English edition of O'Donovan & Phillips The Modern Contract of Guarantee (2003) discussing unconscionable bargain. At 4-155 the learned authors cite the following passage from Alec Lobb (Garages) Ltd v Total Oil (Great Britain Ltd) [1983] 1 WLR 87, 94-95:First, one party has been at a serious disadvantage to the other, whether through poverty, or ignorance, or lack of advice, or otherwise, so that circumstances existed of which unfair advantage could be taken: see, for example, Blomley v. Ryan (1954) 99 C.L.R.362, where, to the knowledge of one party, the other was by reason of his intoxication in no condition to negotiate intelligently. Second, this weakness of the one party has been exploited by the other in some morally culpable manner: see, for example,Clark v. Malpas (1862) 4 De G.F. & J. 401, where a poor and illiterate man was induced to enter into a transaction of an unusual nature, without proper independent advice, and in great haste. And third, the resulting transaction has been, not merely hard or improvident, but overreaching and oppressive. Where there has been a sale at an undervalue, the under-value has almost always been substantial, so that it calls for an explanation, and is in itself indicative of the presence of some fraud, undue influence, or other such feature. In short, there must, in my judgment, be some impropriety, both in the conduct of the stronger party and in the terms of the transaction itself (though the former may often be inferred from the latter in the absence of an innocent explanation) - which in the traditional phrase 'shocks the conscience of the court, and makes it against equity and good conscience ofthe stronger party to retain the benefit of a transaction he has unfairly obtained.[64] Mr Bryant says that he was at a serious disadvantage as he was primarily employed as an electrician and although a director took no part in the administrative side of running the company, and he relied on Ms Williams to ensure he signed nothing in his personal capacity. He says that Ms Williams, as Rexel's agent, procured his signature despite his express agreement with her that she would not have him sign any agreements in his personal capacity, constituting exploitation of the weakness. He also says that the resulting transaction was harsh and oppressive as Rexel knew that from June 2005 Mr Bryant was no longer a director. [65] Mr Chesterman relied on Westpac Banking v Hoyle [2000] DCR 426 andContractors Bonding v Snee [1992] 2 NZLR 157. Westpac Banking v Hoyle is hardly analogous with the present case. The guarantor was 19 and the case turned on an application of the Minors Contracts Act 1969. [66] I agree with Ms Hall's submission that Mr Bryant was not suffering under any kind of handicap by virtue of being employed as an electrician and having no responsibility for financial administration matters. Mr Bryant was a director of Future Electrical. He has since set up his own company which, according to his own evidence, is one of Rexel's top customers. These factors point to his having a level of competence about business matters that is quite at odds with his claim to be at a serious disadvantage in his dealings with Ms Williams. Indeed they make the claim implausible. Mr Bryant would hardly have embarked on his new venture if he regarded himself as a person who lacked business acumen. There is no room for the suggestion that he did not understand the significance of ensuring that he knew what he was signing. [67] Mr Bryant falls well short of raising factors that indicate that he was suffering under any kind of handicap. [68] I also agree with Ms Hall that the guarantee is not oppressive by virtue of the fact that it is unlimited and has no termination provisions. Guarantees of this nature are not uncommon. Whether or not there is an implied right of termination, orwhether the guarantor must secure the creditor's agreement to release will depend on the nature of the guarantee and whether it is entire or divisible. See: Laws of New Zealand, Guarantees and Indemnities, at paragraph 193. In either case where there is evidence to suggest that Rexel knew about Mr Bryant's departure from Future Electrical, there is no suggestion in Mr Bryant's evidence that he took any steps to enquire about rights of cancellation or to negotiate an agreed cancellation. As he did not take steps to ensure that the guarantee was cancelled or to secure a release, I am satisfied that he is fixed with his obligations under the guarantee. [69] For the above reasons, I am satisfied Mr Bryant has not raised a tenable defence based on oppression and unconscionability of bargain.Quantum[70] I turn next to the arguments about quantum. [71] In the case of Mr Linstrom, his counsel accepted that Rexel had provided prima facie proof of quantum, but argued that there are genuine factual disputes about quantum which need to go to trial. The factors relied on were: a) That in late 2005 Rexel imposed a credit limit which gives rise to an estoppel that limits Mr Linstrom's exposure under the guarantee to $500,000.00. b) Mr Linstrom is not liable for Rexel's claim in respect of account 54419. The bulk of the claim in respect of that account relates to two invoices for cable delivered to third parties after Future Electrical went into liquidation and there is a real dispute as to whether Future Electrical incurred any liability for these goods. [72] In the case of Mr Bryant, his case about quantum was advanced at the hearing on much the same basis. He raised the argument about the $500,000.00 credit limit, and he challenged the two invoices. He also raised additional arguments including that Future Electrical's debt to Rexel would be reduced by monies recovered byFuture Electrical's liquidators, and an argument that Rexel has made insufficient discovery to prove quantum in respect of trading account 54419. [73] All of the arguments, although going to Future Electrical's liability in some respects, were raised as arguments as to quantum and I deal with them on that basis. [74] I deal first with the argument based on the credit limit. The argument lacks merit and can be dismissed readily. [75] There is no dispute that the supply contract allowed Rexel to increase or reduce the credit limit as it saw fit or that the guarantee is unlimited as to amount. The reality is that Mr Linstrom and Mr Bryant bound themselves to the terms of the supply contract and the guarantee. If they had wanted to limit their exposure under the guarantee to $500,000.00, then they should have required the inclusion of a relevant limit in the guarantee or taken positive steps on their departure from Future Electrical to negotiate a binding agreement that Rexel would not extend credit to Future Electrical beyond $500,000.00 without their agreement. There is no basis in the evidence for suggesting any such agreement was ever negotiated. Nor is there any evidence of any promise or representation by Rexel that the limit would not be removed without Mr Linstrom or Bryant, or without their agreement. [76] I therefore reject the argument that Mr Linstrom's and Mr Bryant's exposure under the guarantee for Future Electrical's unpaid debts to Rexel is limited to $500,000.00. [77] I turn next to the argument that monies will be available in the liquidation and that Future Electrical's debt to Rexel ought to be reduced to take this into account. [78] There is evidence before the Court that the liquidator's preliminary report indicates that a sum of in excess of $400,000.00 will be available to unsecured creditors. As at the date of hearing however, there was no suggestion that any of the liquidator's funds had at that stage been paid out to Rexel and no indication as to the extent to which they would be. As matters stood at the hearing, the full extent ofFuture Electrical's debt remained due, subject only to any part of the debt that is arguably subject to a tenable dispute on other grounds. [79] I turn therefore to the remaining grounds raised to challenge quantum. [80] The remaining significant challenge relates to account 54419. Both defendants challenged the quantum of this account and in particular two invoices raised against this account. [81] The invoices are shown in a copy of the transaction ledger for this account exhibited to Mr Offord's affidavit evidence. The first invoice is for $171,874.50 debited for cable Future Electrical ordered for a project called the Docks project. The second invoice $119,658.42 for cable Future Electrical ordered for the Aura apartments project. In each case, the orders were made in or about April 2006. Counsel for Mr Bryant advanced the broad submission that Mr Bryant should be entitled to dispute the quantum of these accounts through the discovery process. He went onto argue that Rexel's evidence is confusing and does not provide an adequate basis to establish Future Electrical's liability as well as quantum and that the issues of liability and quantum in respect of this account can only be determined safely at trial. [82] I agree. [83] Mr Offord's evidence indicates that the history of the two invoices is far from straight forward and therefore this is not a claim upon a simple debt where proof of the debt is immediately available. The claims in relation to these invoices have a history where the parties entered into a series of arrangements that changed over some months, involving the issue of original invoices, the subsequent issue of credit notes which apparently cancelled the invoices, the issuing of fresh invoices which modified the terms of payment under the supply agreement to allow payment when Future Electrical itself received payment, and the purported revocation of those invoices and reinstatement of the original invoices. The situation is complicated by an e-mail Future Electrical sent to Rexel in October 2006 which appears to indicate the unconfirmed possibility that part payments of $150,000.00 and $100,000.00 werepaid towards these invoices, but credited to other possibly unrelated charges. Yet further complications arise because the terms of the supply agreement itself suggest that title to the goods may not have passed from Rexel to Future Electrical until they were paid for and the possibility, raised in evidence, that Rexel supplied the goods after the date of liquidation direct to the developers of the Docks and Aura projects. [84] Ms Hall submitted that on a careful reading of the evidence including all of the exhibits, it is clear that Rexel has proved both liability and quantum in respect of these invoices. I disagree. The history of these invoices is not straight forward, and lacks the clarity required in a summary judgment proceeding. In addition, there is the complication that these debts, if indeed incurred by Future Electrical, were incurred after Mr Bryant's and Mr Linstrom's departures from Future Electrical. I accept that in these circumstances they are entitled to see that all of the documentation that Rexel relies on for its contention that Future Electrical is responsible for the amounts claimed in the invoices. I am not satisfied, as matters presently stand, that I can determine with confidence that these debts are Future Electrical's debts and they remain due. Without that determination Rexel is not entitled to summary judgment based on the guarantees for the amounts of the two invoices. [85] Apart from the amounts claimed under the two invoices, there is a relatively small balance of approximately $60,000.00 debited to account 54419 which Rexel claims. Given the somewhat confusing situation relating to the two invoices, and the paucity of documentary evidence to support the balance, I accept that the whole of the claim in relation to account 54419 should be the subject of proof at trial. [86] Significantly the same criticism as to paucity of documentation cannot be levied in respect of the debt owing under account 52608. The evidence for Rexel and Mr Bryant shows that the relevant invoices to support the entries in the transaction ledger for this account were provided to the solicitors for Mr Bryant. At the hearing the need for discovery in respect of this account was not pursued.[87] At the hearing, some other arguments were raised in relation the quantum due under account 54419 but given the findings I have already reached, it is not necessary to deal with them.Other Issues[88] Counsel for Mr Bryant raised the issue of the indemnity that Mr Bryant claims against Mr Linstrom and Mr Williams. He argued that the indemnity is a reason for deferring summary judgment in order to allow Mr Bryant the opportunity to join Mr Linstrom and Mr Williams as third parties. While it would be convenient for Mr Bryant to have the issue of indemnity dealt with in this proceeding. He has not advanced clear reasons to show why that is necessary or desirable. I am not satisfied therefore that there is sufficient reason to delay the entry of summary judgment on the issues currently arising in this proceeding.Result[89] As matters presently stand: a) Rexel has established its claim under the guarantee for $345,173.08 in account 52608. Subject only to any payments that may have been received by the liquidator in payment of any part of the invoices raised in this account, Rexel is entitled to summary judgment for the full amount against both defendants. b) Rexel has not discharged the onus of proof of establishing that no tenable defence has been raised as to liability and quantum in respect of account 54419. Rexel is not entitled to summary judgment on the guarantee in respect of its claim for this account. The claim will need to go to trial in the normal way. [90] In view of these findings, I issue this judgment as an interim judgment, to allow counsel to confer with a view to filing memoranda within seven days of the date of this judgment. The purpose of memoranda is to allow counsel to advise whether there is agreement as to the extent to which any part of the debt owing inrespect of account 52608 has been or is due to be paid out of the funds realised in the liquidation. If appropriate, I will then issue judgment for a reduced amount. [91] There will be a brief chambers mention on 14 December 2007 at 11.45 amwhen I will hear further from counsel on their memoranda. I will also deal with issues of interest and costs at that hearing. In the meantime, costs and interest are reserved. [92] Counsel should also be in a position at the chambers hearing to propose directions for trial to deal with issues of liability and quantum in respect of account 54419. [93] Costs are reserved. I will also hear from counsel on the question of costs at the chambers hearing. Dated at Auckland on __________________________ at ___________ am/pm. ______________________________ Associate Judge Sargisson