BBX FINANCIAL SOLUTIONS PTY LTD V WALLACE COA CA850/2010

BBX FINANCIAL SOLUTIONS PTY LTD V WALLACE COA CA850/2010 19 December 2011IN THE COURT OF APPEAL OF NEW ZEALANDCA850/2010[2011] NZCA 667BETWEEN BBX FINANCIAL SOLUTIONS PTYLTDFirst AppellantAND TRADE MANAGEMENT (2010) PTYLTD (IN LIQUIDATION)Second AppellantAND WAYNE ANDREW WALLACERespondentHearing: 9 August 2011Court: Chambers, Arnold and Stevens JJCounsel: A R B Barker for First AppellantJ Strauss for RespondentJudgment: 19 December 2011 at 4:00 PMJUDGMENT OF THE COURTA The appeal is allowed.B The judgment in the High Court is set aside and the judgment in the District Court is restored.C The appellants are entitled to costs from the respondent on an indemnity basis. In the absence of agreement, those costs are to be fixed in the High Court.D The costs in this Court are also to be on an indemnity basis. In the absence of agreement, this Court will fix those costs.REASONS OF THE COURT(Given by Chambers J)Table of ContentsPara NoThe BBX trading exchange [1]Issues on the appeal [4]With which companies did Ad-A-Cab contract and what were the termsof that contract?The BBX companies [8]Subissues [15]Our evaluation [19]No contract with the exchange company? [25]Contract with a New Zealand company? [34]No incorporation of the Rules? [42]The exchange company no longer exists? [60]Did Mr Wallace give a valid guarantee and, if so, what did hepromise and to whom did he make his promise? [62]Was the guarantee limited? [68]Was the quantum of the BBX claim calculated correctly? [81]Result [87]The BBX trading exchange[1] Between 2001 and 2005, the BBX group of companies1 ran a trading exchange in Australia and New Zealand.2 The members of the exchange were all businesses which were, through the exchange, able to trade their goods and services with each other. The exchange worked on the basis of "trade dollars" (BBX$), an accounting unit used to keep track of the value of goods and services traded. Each member of the exchange had an account. Trades were facilitated by use of transaction vouchers issued by BBX.[2] In 2001, Wayne Wallace, the respondent, decided that his company, Ad-A-Cab (1998) Ltd, should become a member of the exchange. He signed the company up. Mr Wallace was required to give a guarantee. Ad-A-Cab later failed1 There seem to be a large number of companies within the BBX group – and to complicatematters, they seem regularly to change their company names. For the purposes of thisintroduction, we simply refer to the group and its companies as BBX. The appellants are two ofthe companies in the group. The relevant history of their names is set out at [9] below.2 The exchange started before 2001 and continued after 2005, but 2001 to 2005 is the relevantperiod for the purposes of this litigation. The way the exchange operated may have changedsince 2005.and was struck off the register of companies in November 2003. At that time its BBX account was in debit. That is to say, Ad-A-Cab had "bought" more goods andservices than it had supplied. In 2005, BBX sued Mr Wallace in the District Court.[3] BBX won in the District Court before Judge Cadenhead, securing a judgment for a little over $114,000, plus interest and costs.3 On appeal, however, the tables were turned. Harrison J set aside the District Court judgment and Mr Wallace won.4BBX, by leave of the High Court, now appeals to this Court.Issues on the appeal[4] Four issues arise. The first is to determine which company or companies Ad- A-Cab contracted with and the terms of that contract.[5] The second issue is to ascertain whether Mr Wallace gave a valid guarantee and, if so, what he promised and to whom his promise was made.[6] The third issue, which we come to only if Mr Wallace is bound by his guarantee, is whether his liability under the guarantee was limited. Mr Strauss, for Mr Wallace, submits that it was.[7] The final issue concerns the quantum of the BBX claim. Did Judge Cadenhead calculate it correctly?With which companies did Ad-A-Cab contract and what were the terms of that contract?The BBX companies[8] We commence this part of the reasons with an explanation of the role played by the two appellants in the BBX exchange. There were two key companies in the3 BBX Management Ltd v Wallace DC Auckland CIV-2005-004-2106, 7 December 2009 ["the DCjudgment"].4 Wallace v BBX Financial Solutions Ltd HC Auckland CIV-2010-404-208, 19 July 2010 ["the HCjudgment"].trading exchange. One was the exchange company: it is the first appellant, now called BBX Financial Solutions Pty Ltd. The other was the management company: that is the second appellant, now called Trade Management (2010) Pty Ltd.5 The exchange operated according to the "Rules of the Trading Program" (the Rules).Under the Rules, the exchange company operated the trading program. Rule 1.2says that the exchange company "acts as a third party record keeper of tradetransactions amongst members, and directs members to each other for the purpose offacilitating transactions". The management company was responsible for managing the exchange company and the exchange. It was responsible for the issue of trade dollars, regulating the number of trade dollars in the exchange, monitoring accounts that had a debit balance and pursuing recovery of debit balances where the Rules provided that they were recoverable.[9] For ease of reference the following tables set out the changes in the names of the exchange and management companies:Date from which particular nameusedExchange Company Name1 November 1999 Business Barter Exchange Ltd5 October 2000 BBX Limited19 May 2006 BBX Financial Solutions Limited29 September 2008 BBX Financial Solutions Pty LtdDate from which particular nameusedManagement Company Name1 November 1999 Business Barter Exchange Ltd5 It is now in liquidation.25 January 2000 Business Barter Exchange Management PtyLtd26 May 2000 B B X Management Limited4 August 2000 BBX Management Ltd26 September 2000 BBX Ltd28 October 2000 BBX Management Ltd14 May 2010 Trade Management (2010) Pty Ltd[10] In these reasons, we shall use the expressions "exchange company" and "management company" except where it is necessary to refer to one of them by its specific name at the time.[11] To complicate matters further, we note three things. First, it is unexplained in the evidence as to how the exchange company and the management company had the same name (Business Barter Exchange Ltd) for the period 1 November 1999 to 25 January 2000.6[12] Secondly, under Australian State law, companies can register trading orbusiness names, which may be different from the company's company name. Of some relevance in this case is that the exchange company's trading name from10 August 2000 was BBX Ltd, even though that was that company's company nameonly from 5 October 2000 to 19 May 2006.[13] Thirdly, there are also two New Zealand companies. One is called BBX NZLtd ("BBX NZ") and the other BBX Management Ltd ("Management NZ"). By6 From 5 October 2000 to 28 October 2000, the exchange company was BBX Limited and themanagement company BBX Ltd. We are not sure whether this counts as a different name inAustralian law.contrast, the exchange and management companies were both incorporated in Australia.[14] We have set this out in somewhat laborious detail because the key issue in the case is with which company or companies Ad-A-Cab contracted. While Mr Wallace accepts he signed the application form on behalf of Ad-A-Cab, his contention is that he did not in fact contract with either the management company or the exchange company with the consequence that neither is able to sue him in contract.Subissues[15] We shall show our hand at this point. For reasons we shall give, we are satisfied Judge Cadenhead was right to find that the contracting companies were Ad- A-Cab, the exchange company and the management company. We are also satisfied that the terms of the contract included the Rules. That the Rules were incorporated is essential to the BBX claim as the key provisions on which they rely are to be found only in the Rules.[16] In the next section of these reasons for judgment, we shall set out in brief form why we have reached that view. We shall then deal with four arguments Mr Strauss advances on Mr Wallace's behalf. We shall explain why we have not accepted his submissions in this respect. The four arguments he advanced are:(a) there was never a contract with the exchange company, which is the only entity which can sue under the Rules;(b) Ad-A-Cab's contract was with a New Zealand company, not an Australian one;(c) the Rules were not incorporated as part of the contract;(d) the second plaintiff in the District Court, BBX Financial Solutions Ltd, no longer exists, with the consequence that judgment was given in the District Court in favour of a non-existent legal entity.[17] It will be evident that Mr Strauss's argument under this head had two mainpoints: Ad-A-Cab did not contract with the appellants and, even if it did, the Rules were not incorporated in the agreement.[18] There is no completely logical order in which to deal with these arguments, which are to an extent inconsistent. (We do not mean that as a criticism.) In the end, we have elected to deal with them in the order of their apparent strength, with the strongest coming first.Our evaluation[19] On 15 November 2001, Mr Wallace signed two forms. We need to deal with only one of them at this stage. It was an application form headed: "MemberApplication and Acknowledgement Statement between BBX Management Ltd & theMember". (We shall call that document "the application form".) BBX Management Ltd was the then current name of the management company. Later in the application form it reads: "This application shall not be deemed accepted by BBX Management Ltd until processed by BBX Management Ltd." We know the application was accepted by it as an authorised BBX officer signed the document in the appropriate place and dated it (also 15 November 2001).[20] The applicant (here, Ad-A-Cab) also agreed "that at all times [it would] adhere to the Rules of the BBX Trading Program and Members' Information Booklet". The management company for its part agreed that it would, "uponacceptance of this signed application form, ... mail out to the Applicant(s) copies of: Rules of the Trading Program, Directory and all other necessary materials".[21] In our view, it is clear that Ad-A-Cab contracted at least with the management company.[22] Given that Ad-A-Cab agreed to "adhere to the Rules", we have no doubt theywere incorporated as part of the contract. Indeed, the application form would be meaningless without the incorporation of the Rules. Among the Rules were these:2.1 Purpose. The purpose of these rules (the "Rules") is to regulate theTrading Program by setting out the terms upon which Members may trade. Subject to the provisions of the Articles, these Rules govern the operation of the Trading Program.2.2 Legally Binding. The Manager, the Exchange Company and each Member agree to be bound by these Rules, which, by force of the Articles and the Membership Agreement signed by each Member, forms a contract between the Manager and the Exchange Company and all of the members jointly, between the Manager and the Exchange Company and each of the members severally, and between each Member and each other member.2.3 Survival of Obligations. These Rules shall at all times be binding on the Members and obligations imposed upon Members under these Rules shall survive suspension or termination of the right of a Member to participate in the Trading Program.[23] "The Manager" was defined in r 1.3 as Business Barter ExchangeManagement Ltd. That was not the name of the management company as at November 2001. By then, it was called BBX Management Ltd. The Rules, however, dated from an earlier time. On the first page of the Rules, the following notes appears:This document was lodged on behalf of Business Barter Exchange Limited and Business Barter Exchange Management Limited, following negotiations between the Australian Securities Commission ("ASC") and International Reciprocal Trade Association (Australasia) Limited ("IRTA") for the purpose of obtaining an exemption under Section 1084 of the Corporations Law.[24] We think it is clear that "the Manager" has always referred to themanagement company, whatever its name was at a particular time.[25] "The Exchange Company" was referred to as Business Barter ExchangeLimited. That was the old name of BBX Financial Solutions Pty Ltd, before this Court as the first appellant. By virtue of r 2.2, the exchange company became a party to the overall contractual relationship between BBX and its members. In technical terms, the management company, when it accepted Ad-A-Cab's applicationfor membership, contracted not only on its own behalf but as agent for the exchange company. It is clear from the Rules that members owed obligations to both the management company and the exchange company.[26] Strong support for our contractual analysis is also provided by the parties'subsequent conduct. Each time Ad-A-Cab "bought" goods or services through theexchange, it and the seller completed a transaction voucher, which the seller then submitted to BBX. The voucher was in the name of Business Barter Exchange Limited. Obviously, voucher booklets were printed in bulk at the time when the exchange company was known as Business Barter Exchange Limited; these vouchers continued to be used by BBX and exchange members well after Business Barter Exchange Limited had changed its name to BBX Limited. Each voucher contained the seller's name and account number and the buyer's name and accountnumber. It described the goods or services purchased and their value. The buyer then signed the following acknowledgment:I acknowledge receipt for goods and services and liability for changes7 as recorded on my monthly BBX statement and agree to perform the obligations as set out in the BBX Membership application and the BBX Rules of the Trading Programme.[27] There are a number of these vouchers in evidence, all signed by Mr Wallace on behalf of Ad-A-Cab. Accordingly, this is not a case where the purchaser acknowledged the binding nature of the Rules on just one occasion, when applying for entry to the programme; Mr Wallace acknowledged their binding nature every time he purchased goods or services through the exchange.No contract with the exchange company?[28] A crucial provision in the Rules was r 3.4:3.4 Debit Balance a Liability of Member. A member whose Trade Account has a debit balance is liable, in accordance with these Rules, either:(1) to supply goods or services to an equivalent value to another member in accordance with these Rules but not otherwise; or(2) if the Member has not discharged the Member's liability bysupplying goods or services to another Member in accordance with these Rules, to pay to the Exchange Company an amount in cash dollars equivalent to the amount in Trade Dollars of the debit balance in accordance with these Rules.[29] The exchange company relied on that rule in the claim against Mr Wallace, the assertion being that Mr Wallace had guaranteed Ad-A-Cab's obligation "to pay to7 This presumably is a typographical error: it should read "charges".the Exchange Company" Ad-A-Cab's debit balance. Mr Strauss submitted that theargument failed because the exchange company was not a party to the contract.[30] Mr Strauss submitted that the reference in the Rules to Business Barter Exchange Ltd could not be explained simply as a reference to an earlier name of theexchange company because "all the documentation generated after execution of the agreement and guarantee, and all the transaction vouchers issued [to Ad-A-Cab],refer to Business Barter Exchange Ltd". He submitted that Ad-A-Cab, rather than dealing with the company now known as BBX Financial Solutions Pty Ltd, had contracted with a totally separate company that happened to be called Business Barter Exchange Ltd. It followed that there was no primary liability underlying the guarantee to BBX Financial Solutions Pty Ltd.[31] We do not accept this submission. The Rules do refer to Business Barter Exchange Ltd, but we have already provided the reason why the Rules referred to the exchange company by its old name. The Rules constituted a document fixed in time. As for the transaction vouchers, as we have said, they were obviously printed in bulk in 1999 or 2000 when the exchange company was known as Business Barter Exchange Ltd. Obviously, BBX decided not to reprint all these vouchers on a change of name.[32] Mr Michael Touma, the managing director of the BBX companies, gave evidence that the company now called BBX Financial Solutions Pty Ltd was always the exchange company. No other company had operated the exchange. No other company could operate the exchange, according to Mr Touma, because of regulatory requirements imposed by the Australian Securities Commission.[33] We regard it as fanciful to suggest that there was another company called Business Barter Exchange Ltd, performing the same function as the exchange company. Mr Wallace provided no evidence to suggest there was another company. We see no reason to doubt Mr Touma's evidence that the company now called BBX Financial Solutions Pty Ltd has always been the exchange company and is the company referred to as the Exchange Company in the Rules.Contract with a New Zealand company?[34] Mr Strauss's next argument was that Ad-A-Cab had contracted with a New Zealand company. Management NZ was originally the sole plaintiff in the District Court. Subsequently BBX decided it had got the wrong plaintiff and the exchange company and the management company were added as additional plaintiffs. Judge Cadenhead determined that there was no contract with Management NZ. He gave judgment solely in favour of the exchange company and the management company. Management NZ did not cross-appeal against that finding. Indeed, Mr Barker, who appeared for BBX before us, accepted that Management NZ had no claim against Mr Wallace.[35] Mr Strauss asserted to the contrary, however. He pointed to evidence Mr Wallace gave in the District Court that he believed he had contracted with a New Zealand company. Mr Strauss referred to the second document Mr Wallace hadsigned on 15 November 2001. This was a document headed "Membership Schedule2001-2002". (We shall refer to this as the membership schedule.) The documenthad in its banner "BBX" in very large letters. Immediately underneath it was"Business Barter Exchange Ltd" (the original name of the exchange company). Atthe bottom of the membership schedule appeared the words:BBX NZA Wholly Owned Subsidiary of BBX Holdings Ltd.[36] Underneath that notation was an Auckland address, an Auckland phone number, an Auckland fax number, and an email address (bbx@bbx.co.nz). The membership schedule referred to certain fees. These fees were expressed in either New Zealand dollars or BBX dollars or as a percentage of New Zealand dollars or BBX dollars.[37] Mr Strauss also referred to the fact BBX NZ had initiated debt collection instructions and that Management NZ had first brought the proceedings.[38] We do not accept Mr Strauss's submission. This case involves a written agreement. The only companies mentioned in the application form are Australiancompanies. The address of BBX Management Ltd is a New South Wales address. The Rules refer only to Australian companies. The Rules provide for the applicationof "the laws of South Australia". The Rules further require members to "submit tothe jurisdiction of the courts of competent jurisdiction in the State of SouthAustralia".[39] Mr Wallace may have dealt with a BBX employee in New Zealand, but that in itself tells us nothing about the identity of the contracting parties.[40] The membership schedule is a confusing document. It set out fees for New Zealand members of the BBX exchange, fees which were payable under the Rules. There is nothing surprising, therefore, in the fact that the schedule refers toNew Zealand dollars. What is confusing is the reference to "BBX NZ". Thereclearly were two New Zealand companies. The exact role of those companies within the BBX group was never satisfactorily explained. In our view, however, Judge Cadenhead was right to find that the reference to BBX NZ on this schedule could not override what was contained in the application form (the primary contractual document) and the Rules it incorporated. Those documents were clear that the contracting companies were the two Australian companies, the exchange company and the management company.[41] Finally, Mr Strauss's reference to BBX NZ as having initiated debt recoveryprocedures and to Management NZ as having commenced the legal proceeding is no doubt embarrassing to BBX. It tends to show that BBX management were somewhat confused about which company did what. The unusual frequency with which the names of the BBX companies changed would have confused anyone. But this managerial confusion, and the lawyerly confusion which followed, does not alter what the application form and the Rules show, when properly analysed. Ad-A-Cab'sobligation to pay its debit balance was owed to the exchange company and, under the Rules, could be sued on by the management company.No incorporation of the Rules?[42] Mr Strauss submitted that the Rules had never been incorporated into the contract. If this was correct, the BBX claim would have to fail as the provisions on which BBX relies are all contained within the Rules.[43] Mr Strauss advanced this submission in two ways. First, he submitted that the Rules were not incorporated because Mr Wallace did not have clear notice of them prior to the conclusion of the agreement. His second argument was a fallback position. He submitted that, even if we found that sufficient notice had been given to incorporate the Rules in general, rr 3.4 and 16.1 were not incorporated because they were onerous terms. We have already set out r 3.4 at [28] above. Rule 16.1 provided for an interest rate of 25 per cent, compounding monthly, on unpaid debts.[44] For the first proposition, Mr Strauss relied on two cases, Thornton v Shoe Lane Parking Limited8 and Nalder & Biddle (Nelson) Ltd v C & Fishing Ltd.9 The former concerned a ticket from an automatic ticket machine. The parking machine was outside a parking garage. Inside the parking garage there was a sign that set out conditions of parking in the car park. The conditions included an exclusion clause exempting the owners of the car park from liability for personal injury sustained while in the car park. The small print on the back of the ticket said that it was issued subject to the conditions in the car park. The English Court of Appeal held that the conditions were not incorporated into the contract. The conditions were not incorporated because a party could only include conditions in a contract by clear notice to the other party. By the time the ticket was printed it was too late to give notice of any conditions sought to be included in the contract.108 Thornton v Shoe Lane Parking Limited [1971] 2 QB 163 (CA).9 Nalder & Biddle (Nelson) Ltd v C & Fishing Ltd [2007] 1 NZLR 721 (CA). Leave to appealrefused: [2006] NZSC 98, [2007] 1 NZLR 721.10 At 169 per Lord Denning MR (the contract was concluded when money was put into themachine); at 173–174 per Megaw LJ (conditions could not be introduced after the ticket wasprinted because at the time the ticket was issued as a matter of hard reality it would have beenpractically impossible for the defendant to withdraw from the garage); and at 174 perSir Gordon Willmer (causing the machine to produce a ticket was an irrevocable step and anyattempt to introduce conditions after that point was doomed to fail).[45] In Nalder & Biddle the parties, a marine engineering company and a boat owner, had entered into a partly oral and partly written contract for fitting out a fishing vessel. After the contract was concluded, work for the fit out was specifiedon job cards, which purported to incorporate the marine engineer's standard termsand conditions. The conditions included a provision limiting the engineer's liability. This Court held that the fact the boat owner had no knowledge of the limitation provision at the time the contract was concluded was decisive.11 Because the boat owner had no knowledge of the condition when the contract was concluded, the conditions could not be said to have been incorporated.[46] These cases can be distinguished. In both, the contracts were made before the consumer knew the service provider12 was purporting to impose conditions. That is not the case here. Mr Wallace, both as director of Ad-A-Cab and as guarantor, knew about the Rules and their incorporation into the contract before he signed the application form. In those circumstances, express reference to terms in another document is sufficient to incorporate those terms into a contract.13 In addition, as we have said, each time he made a purchase through the exchange, Mr Wallace acknowledged the applicability of the Rules and Ad-A-Cab's obligations under them.[47] In any case, in L'Estrange v Graucob14 Scrutton LJ distinguished "ticket cases" from cases where there is a signed contract:15In cases in which the contract is contained in a railway ticket or other unsigned document, it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions. These cases have no application when the document has been signed. When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.[48] It did not matter that the consumer did not know about the conditions because she had not read the agreement. The High Court of Australia has recently affirmed11 At [32] and [46].12 We refer for convenience to the party relying on incorporated conditions as "the serviceprovider" and the other party as "the consumer".13 Smith v South Wales Switchgear Co Ltd [1978] 1 WLR 165 (HL) at 171, 177.14 L'Estrange v Graucob [1934] KB 394 (CA).15 At 403. See also at 406 per Maugham LJ.L'Estrange for the purpose of Australian law. It rejected any importation of the notice requirements that apply to unsigned contracts to signed contracts.16[49] For these reasons, we are satisfied the Rules were incorporated, at least in general terms. It would be extraordinary if the position were otherwise, as the application form and the membership schedule on their own make little sense.[50] We now turn to consider Mr Strauss's fallback argument to the effect that,even if the Rules in general were incorporated, rr 3.4 and 16.1 were not because they were onerous. For them to become part of the contract, BBX had to specifically point them out to Mr Wallace before he signed. The first case Mr Strauss relied on in support of this submission was the decision of the English Court of Appeal inInterfoto Picture Library Ltd v Stiletto Visual Programmes Ltd.17 The Court held that a condition on a delivery note received by the defendant from a company that hired out photographic transparencies was unenforceable. The condition imposed a fee of £5 a day for each transparency hired for every day the hirer retained the transparencies after they were due back. The Court held that merely giving notice that there were conditions was not enough to incorporate such an onerous term. To be enforceable, such an onerous term had to be specifically pointed out before the contract was concluded.18 We find this decision of little assistance as there was no signed contract.[51] We were also referred to Ocean Chemical Transport Inc v Exnor Craggs Ltd.19 Evans LJ, with whom Henry and Waller LJJ agreed, said that there was a possibility that, although a party had signed an acknowledgement incorporating terms and conditions into a contract, onerous terms might not be enforced in:20what might be regarded as an extreme case, where a signature was obtained under pressure of time or other circumstances, and where it was possible to satisfy the Interfoto test; that is to say, that the clause was one which was particularly onerous or unusual for incorporation in the contract in question.16 Toll (FGCT) Pty Limited v Alphapharm Pty Ltd [2004] HCA 52, (2004) 219 CLR 165 at 184–186.17 Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1988] 1 All ER 348 (CA).18 At 352 and at 357–358.19 Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyd's Rep 446 (CA).20 At [48].[52] These comments were obiter dicta as the Court held that the clause in disputein that case was enforceable, there being "in fact no evidence [supporting] theproposition that this clause [was] in any way extreme or totally unexpected to befound in a contract such as this".21 In any event, this is not "an extreme case" of the kind the Court envisaged.[53] Finally, we were referred to the decision of the Supreme Court of Canada inCrocker v Sundance Northwest Resorts Ltd.22 Mr Crocker had signed an application form to enter a sports event. The application form contained a clause that purported to exempt Sundance from liability for any loss. Mr Crocker was injured in the event. The Court held that the exclusion clause was not enforceable because, although the application form was signed, the exclusion clause was not drawn to his attention, he had not read it and he did not know of its existence.23[54] We think this case can be distinguished. Mr Crocker was suing the event organisers in tort. They attempted to use the exclusion clause as a defence to that claim. Different considerations arise in those circumstances, particularly where Mr Crocker had thought he was simply signing an entry form.24 The Court held he would not have expected it to contain an exclusion clause of this kind and in those circumstances it was essential that the clause be drawn to the entrant's notice.[55] It is perhaps uncertain exactly how far these cases take Mr Strauss'sargument. In the end, we have concluded we do not need to resolve that question. That is because it has not been shown either r 3.4 or r 16.2 was onerous. The fact r 3.4 provides for liability in real money is unsurprising. That was the means by which the exchange company obtained a measure of commercial protection. It is difficult to see how the scheme could operate if a failure to pay trade dollar debts did not at some point result in the member or its guarantor becoming liable in real money. Otherwise, there would be nothing to stop members from purchasing goods up to their credit limit and then simply refusing to supply goods of an equivalent value. Far from being onerous, such a rule is to be expected in a barter exchange.21 At [49].22 Crocker v Sundance Northwest Resorts Ltd (1989) 51 DLR (4th) 321 (SCC).23 At 332.24 At 332–333.[56] As for the interest rate provided by r 16.2, although it seems high, we cannot conclude that it is unusual or onerous as Mr Wallace has provided no evidence of what is usual for the industry. Mr Wallace never pleaded that the interest rate was onerous and therefore unenforceable. Nor did Mr Strauss cross-examine Mr Touma on this point.[57] We are satisfied that rr 3.4 and 16.1 were incorporated into the agreement.[58] We should also mention that Mr Strauss submitted Mr Wallace had never received a copy of the Rules even after he entered into the agreement. Judge Cadenhead did not believe Mr Wallace's evidence to that effect.25 The Judgeobviously preferred Mr Touma's evidence that it was standard practice to send out the Rules and other relevant information to new members. As well, the Rules werereproduced on BBX's website.[59] We see no reason to disturb the Judge's credibility finding in this respect. Inany event, it would not matter whether the Rules had been sent to Mr Wallace. Ad-A-Cab had agreed to be bound by them not only in the application form but also in every transaction voucher it entered into. There is no dispute that the Rules were in existence and available. If Mr Wallace was interested in them but was not sent them, he should have asked for them.The exchange company no longer exists?[60] Mr Strauss advanced his final submission under this head with some diffidence. He did so out of deference and respect to Harrison J, who had found in Mr Wallace's favour on two grounds. The second – "an additional fatal flaw"26 –was that BBX Financial Solutions Ltd, the second plaintiff in the District Court, the first respondent in the High Court and the first appellant before us, had "ceased to exist".27 The High Court Judge continued:25 The DC judgment at [24].26 The HC judgment at [25].27 At [25].Its name was changed to BBX Financial Solutions Pty Ltd on 29 September 2008. No application was made to add or substitute the new company as a party before the hearing in the District Court on 20 April 2009. Judgment was given on 7 December 2009 in favour of a non-existent legal entity.[61] Mr Strauss submitted it was not entirely clear what Harrison J meant by those remarks. We are not completely sure either. But, to clear this matter out of the way,we hold that BBX Financial Solutions Ltd did not "cease to exist" when it changedits name. There would have been no need "to add or substitute the new company as a party" as it was not a new company after its name change. It was the samecompany with a new name. The District Court did not give judgment "in favour of anon-existent legal entity".Did Mr Wallace give a valid guarantee and, if so, what did he promise and to whom did he make his promise?[62] We have established so far that there was a contract involving Ad-A-Cab, the exchange company and the management company and that, among its terms, were the provisions of the application form, the Rules and the membership schedule. But BBX has not brought a claim, of course, against Ad-A-Cab as it has no assets and has been struck from the register. Rather, the claim is against Mr Wallace as guarantor.[63] Mr Wallace, as director of Ad-A-Cab, agreed, in one part of the application form, to be:liable for payment of all purchases and fees outlined in the [Membership] Agreement, and further hereby guarantee the repayment of all debts and liabilities of the member arising from the Agreement. This Guarantee shall always be a continuing Guarantee and shall continue in full force and effect until all liabilities of the member (including but not limited to the credit line) shall be fully paid and satisfied and ... will at all times hereafter indemnify and keep indemnified BBX Ltd against all claims in respect of debts and liabilities that may be incurred by the member. This indemnity shall extend against all action, suits, proceedings, claims, demands, costs and expenses whatsoever which may be taken against BBX Ltd and BBX Management Ltd or incurred or become payable by BBX Ltd or BBX Management Ltd in respect thereof.[64] We are satisfied that Mr Wallace thereby guaranteed Ad-A-Cab's debts andliabilities arising from the agreement. Those liabilities were owed to the exchangecompany and the management company. We leave to the next section of these reasons for judgment possible limitations on the guarantee, as argued for by Mr Strauss.[65] As we have said, Harrison J found in Mr Wallace's favour on two grounds. The first was that he thought Mr Wallace had provided his guarantee to "BBX Ltd"28but BBX was not a party to the agreement. Since Ad-A-Cab had never entered into an agreement with BBX Ltd, Ad-A-Cab could not be liable to it, with the consequence that the guarantee guaranteed nothing.29[66] Mr Strauss, again out of deference to Harrison J, noted this argument in Mr Wallace's favour. He did not, however, pursue it with vigour. He was right notto do so. It is only the first part of the guarantee with which we are concerned here. It is clear. The guarantee relates to repayment of Ad-A-Cab's debts and liabilities under the agreement. Since those obligations were owed to the exchange company and the management company, it is to those entities Mr Wallace made his promise of guarantee.[67] With respect to Harrison J, we reject his reasoning on this point. We prefer the reasoning of Judge Cadenhead.Was the guarantee limited?[68] Mr Strauss submitted that, if Mr Wallace was liable under the guarantee, his liability was limited to the cash equivalent of BBX$10,000. He submitted BBX dollars were worth only 30 cents in real money. Since Mr Wallace had paid $4,000 towards Ad-A-Cab's debt, he had more than discharged his liability.[69] Mr Strauss, in making the submission, relied on the application form and the membership schedule. The application form contains two boxes. "Proposed Credit Limit" is typed next to one box and "Approved Credit Limit" is typed next to theother. Each box contains, in handwriting, "10,000". The membership schedule has28 The HC judgment at [20]–[21].29 At [23].various fees listed on it, expressed in BBX dollars or New Zealand dollars. Crosseshave been placed through some of the fees. In handwriting are the words "Full Trade". Below the fees the membership schedule states:The member acknowledges the above fees and charges.The member acknowledges that all sales will be on full trade.[70] Mr Strauss submitted Mr Touma conceded in cross-examination that the effect of the notations on the membership schedule was that all fees and transactions between Ad-A-Cab and BBX Ltd were to be in BBX dollars and not real money.[71] Judge Cadenhead rejected a similar submission made to him.30 In essence, his Honour found that, on termination of membership, a member had to pay cash to bring the account to a nil balance. If the member failed to do that, that became theguarantor's responsibility. The guarantee was not limited to the credit limit. In any event, $10,000 was only an initial credit limit, which BBX had the power to increase. Here the credit limit had been increased with Mr Wallace's consent.[72] Judge Cadenhead also noted that Mr Strauss's submission to him wascontrary to Mr Wallace's conduct. Phone records in evidence, which Mr Wallace didnot challenge, showed that Mr Wallace had agreed to make cash payments to reduce his debt.31 The Judge also found that Mr Wallace had discussed with Mr Touma various other ways of reducing his debt.32[73] We agree with the Judge's analysis. Although Mr Touma accepted in cross- examination that liability for the fees associated with the exchange were to be paid in BBX dollars, he vigorously denied, on several separate occasions, that guarantors'debts were to be paid in anything other than cash. Mr Touma explained the necessity for debts to be paid in real money if the member had insufficient BBX dollars to its credit:If your client owes the system money we must collect that money andbalance our system out. For every member that's in credit there has to be amember in debit, so as managers we have a responsibility to make sure the30 At [38].31 At [15].32 At [16].system balances. The only way we can make sure that system balances is by making sure people such as Mr Wallace pay their debts.[74] He elaborated:If Mr Wallace was to give us $10 tomorrow we would go out, as an organisation, and buy $10 worth of plastic cups, assuming there was a member in need of plastic cups. We would then sell those plastic cups tothat member in need of those trade dollars, but we've paid cash for theplastic cups. Those paid dollars would go towards extinguishing his liabilityof $114,000 in the system. And that's exactly how the system works.[75] Mr Touma's explanation is consistent with r 3.4, which provides that, if debts cannot be paid in trade dollars, they must be paid in real money. Further, the partiesexpressly agreed, in r 3.1, that "the cash equivalent of one Trade Dollar is oneAustralian dollar and the Trade Dollar equivalent of one Australian dollar is oneTrade Dollar".33 It is quite irrelevant what BBX dollars trade at on secondary markets outside the exchange.34[76] We also do not accept Mr Strauss's submission as to the meaning of "Full Trade" on the membership schedule. Those words must be read in light of r 15. Rule 15 provided for payment of transaction/service fees, administration anddirectory fees. Each type of fee was payable either "in cash or in Trade Dollars".We hold that what "Full Trade" on the membership schedule meant was that Ad-A- Cab had elected to make the fees payable under r 15 in BBX dollars, if it could. But that election could not override r 3.4. It did not limit Ad-A-Cab's or Mr Wallace'sliability to BBX dollars if Ad-A-Cab did not have sufficient BBX dollars to its credit to meet the relevant fees.[77] As for the sum guaranteed, it is correct that the initial credit limit was$10,000, as stated on the application. However, the Rules allowed for members'credit limits to be increased. BBX's power to increase the credit limit was alsoexplained in the Members' Information booklet. As we have said, Judge Cadenheadfound that this power was exercised, with Mr Wallace's consent. We see no basis for disturbing this finding.33 In actual fact, as Mr Touma explained, transactions for New Zealand members were done inNew Zealand dollars with the consequence that one Trade Dollar was, for New Zealandmembers, the equivalent of one New Zealand dollar. No point was made of this at trial.34 That was the basis of Mr Wallace's assertion that a BBX dollar was worth only 30 cents.[78] In any case, the guarantee expressly stated that liability was "not limited to the credit line". Likewise, r 21.4 provided that a member who had traded beyond its credit limit was liable to pay to the exchange the cash equivalent of the amount by which the member had exceeded its credit limit. Each transaction voucher stated that the member agreed to comply with the rules of the trading programme. Accordingly, even apart from the agreement to increase the credit limit, in using transaction vouchers beyond the credit limit, Mr Wallace must be taken to have consented to increasing Ad-A-Cab's liability.[79] Accordingly, Mr Strauss's reference to the initial credit limit does not advance Mr Wallace's case. Mr Wallace was both the director of Ad-A-Cab and its guarantor. His assent as director of Ad-A-Cab to raising the credit limit must be taken as an implied assent to an increase in his personal liability to guarantee Ad-A-Cab's debts.35[80] We reject Mr Strauss's submission that Judge Cadenhead was wrong infinding no limitation on Mr Wallace's guarantee.Was the quantum of the BBX claim calculated correctly?[81] To prove the quantum of its claim, BBX produced its computer-generated transaction history with Ad-A-Cab, showing every purchase and every sale that went through the exchange. Judge Cadenhead had accepted the accuracy of that schedule and gave judgment accordingly.[82] Mr Strauss submitted that the quantum was overstated. He said BBX'stransaction history was erroneous because it failed to record any of Ad-A-Cab'sexchange sales over the period, other than three invoices Ad-A-Cab had rendered to BBX on a side-deal.[83] So what was the evidence as to the sales Ad-A-Cab had allegedly made? Mr Wallace said nothing on this topic in either his affidavit in opposition to BBX'ssummary judgment application or his statement of evidence at trial. He discovered35 Australian Guarantee Corporation (NZ) Ltd v Slade CA256/91, 24 August 1992 at 11–12.no documents relating to the alleged sales. The assertion concerning unrecorded sales emerged for the first time during his cross-examination. He was asked whether he had any records to support the assertion of other sales. He said he did not as"everything [had gone] to the liquidators". The Judge asked him:Q How much do you think you would have provided [to other BBX members]?A Your Honour, I'm only guessing, but it would be, I would imagine, 50 grand or something. 30, 50 grand. As I said, Your Honour, Ididn't run the accounts, but in these records here, it's not showingany of the business that we actually did.[84] That was the sole evidence on the topic. Mr Strauss cross-examined Mr Touma briefly on this topic. Mr Touma could do no more than reiterate the accuracy of the transaction history. This was hardly surprising, given that this line of defence had not been signalled in the pleadings, in discovery or in Mr Wallace'sstatement of evidence. Since there is no evidence to throw doubt on BBX'scomputer system, we are left with two possibilities. One possibility is that Mr Wallace was lying or mistaken when he said that Ad-A-Cab had "sold" servicesto other BBX members. The other possibility is that he or his accounts people had failed to submit the transaction vouchers to BBX for crediting. We do not need todecide which of those possibilities is more likely, as either way BBX's claim remainsunaffected.[85] Like Judge Cadenhead, we have no reason to doubt the BBX claim. Mr Wallace's belated evidence as to unrecorded sales is generalised and not supported by any contemporary documentation.[86] We are satisfied the quantum of the claim was proved on the balance of probabilities.Result[87] We allow the appeal. Mr Barker, for the appellants, asked us to set aside the High Court judgment and to restore the District Court judgment. That we do. We have called the second appellant, the management company, by its new name.[88] We now turn to costs. Rule 17.7 read as follows:Payment of costs. In the event of breach of the Rules by a Member, that Member shall pay to the Manager all reasonable legal costs of the Manager and/or the Exchange Company in enforcing these Rules on an indemnity basis together with interest at the rate of 25% per annum from the date upon which such costs are paid by the Manager until the date on which the Member makes payment.[89] Mr Wallace's guarantee would apply to that obligation on Ad-A-Cab's part. Clearly the appellants will now be entitled to costs on that basis in the High Court and here.[90] We have not been given the details to calculate the quantum of indemnity costs. We trust the parties will be able to agree those costs. In the absence of agreement, High Court costs are to be fixed in the High Court by any High Court Judge. If costs in this Court cannot be agreed, we will fix them. Memoranda can be filed.Solicitors:Davies Law, Auckland for AppellantsGarry Pollak and Co, Auckland for Respondent