Dominion Finance Group Limited (in rec and in liq) v Tauber HC Auckland CIV-2009-404-6248 [2011] NZHC 529 (31 May 2011)

Last Updated: 19 June 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2009-404-6248}

BETWEEN DOMINION FINANCE GROUP LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

Plaintiff

AND DAVID ANDREW TAUBER Defendant

Hearing: 9 May 2011

Appearances: A W Johnson & C Mansell for Plaintiff

D Grove for Defendant

Judgment: 31 May 2011

_{RESERVED JUDGMENT OF ELLIS J}

This judgment was delivered by me on 31 May 2011 at 11 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors: Martelli, McKegg, Wells & Cormack, PO Box 5745, Auckland 1141

V Carmine, PO Box 2603, Auckland 1050

Counsel: D Grove, PO Box 130, Auckland 1140

DOMINION FINANCE GROUP LTD (IN RECEIVERSHIP AND IN LIQUIDATION) V TAUBER HC AK CIV-2009-404-6248 31 May 2011

[1] This judgment concerns a claim made by the receivers of Dominion Finance Group Ltd (“DFG”) under a $5 million personal guarantee given in 2007 by Andrew Tauber. The guarantee relates to a loan of approximately $9 million in relation to a loan made by DFG to Maximum Finance Ltd (“MFL”). An application by DFG for summary judgment against Mr Tauber was declined by Asher J “by a fairly bare margin” on 26 February 2010.[1]

[2] It is not in dispute that in 2007 MFL became indebted to DFG for approximately $9 million and that it has subsequently defaulted on the loan (as at August 2008 MFL was over $1.3 million in arrears). Nor is it in dispute that Mr Tauber gave the $5 million guarantee. Rather, he seeks to defend DFG‟s claim under the guarantee on the basis that either:

(a) DFG agreed to compromise the debt for $1 million (20 cents in the dollar), payable in staggered lump sum amounts; or

(b) DFG made representations that it would accept such a compromise giving rise to an estoppel preventing recovery of the full amount.

[3] Although no payments to DFG under the alleged compromise have ever been made by Mr Tauber, he also says that he reached a subsequent agreement with DFG whereby he was permitted to delay making the payments.

[4] DFG denies that any such agreements were reached and that any relevant representations were made.

[5] The issues now for determination are thus almost entirely factual in nature. It is therefore necessary to traverse the evidence in some detail.

Evidence

[6] At the outset I record that much was made by Mr Grove (on Mr Tauber‟s behalf) of the apparent absence of file notes kept by the key DFG players, and in particular Mr Adams who was the lending manager responsible for the MFL loan and with whom Mr Tauber principally dealt. His reason for doing so was the submission that DFG had a higher standard of proof by virtue of its status as a financial institution. Mr Grove said that the absence of file notes should count against DFG‟s version of events to the extent it conflicted with that of Mr Tauber.

[7] I do not accept that submission. While Mr Adams‟ record-keeping may not have been exemplary, in my view the document trail is adequate enough. A tolerably clear picture emerges from the internal DFG email correspondence and the other relevant documents. In fact it appears that Mr Tauber himself did not make file notes and indeed his version of events is largely unsupported by any documentation. And the cases relied on by Mr Grove do not in my view warrant the approach urged upon

me.[2]

[8] It appears that Mr Tauber became associated with DFG through his former business partner, Terry Wilson. Mr Wilson himself became involved with DFG by dint of a pre-existing business relationship with the National Bank where Mr Adams worked as a lending manager. When Mr Adams moved to DFG in 2002, it seems that he brought Mr Wilson with him.

[9] During 2005 and 2006, a number of business ventures, in which companies owned by Mr Wilson and Mr Tauber were involved and which had been financed (inter alia) by DFG, began to run into difficulties. The companies defaulted on various loan repayments. Both Mr Wilson and Mr Tauber had given various

_{personal guarantees in relation to these (and other) financing arrangements.}

[10] Although historically Mr Tauber had played a back seat role in the operation of these businesses, it seems that over this period Mr Wilson‟s involvement began to diminish significantly. Creditors (including DFG) lost faith in Mr Wilson and instead turned to Mr Tauber, effectively requiring him to take a more active part in resolving the difficulties. At some time in late 2006 or early 2007, Mr Wilson went abroad and he remains there to this day. Mr Tauber was left holding the baby.

[11] In November 2006, prior to his departure overseas, Mr Wilson came up with a proposal whereby the various debts owed by the Wilson/Tauber enterprises to DFG would be restructured. Essentially this proposal involved:

(a) Incorporating a new company (MFL);

(b) Rolling up and refinancing all the existing indebtedness through a new loan made by DFG to MFL;

(c) An agreement (but not a guarantee) by two charitable trusts (known as the Producer Trust and the Active Trust) that they would underwrite the subsequent loan repayments. The two trusts would meet the repayments from revenue that they received from gaming machines operated at various hotels and pubs owned by the Wilson/Tauber entities;

(d) Transferring DFG‟s existing (largely worthless) securities to MFL

who would then give DFG a charge over those securities;

(e) $4 million personal guarantees by Mr Wilson and Mr Tauber.

[12] In the lengthy finance application prepared on behalf of Messrs Wilson and Tauber by Mr Adams in November 2006, he referred to the pros and cons of the proposal in the following terms:

Risks

Continued miss [sic] management of going concerns