Carters a division of Carter Holt Harvey Limtied v Cancian [2018] NZHC 1496 (22 June 2018)

Last Updated: 28 August 2018

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV 2017-470-000166 [2018] NZHC 1496

BETWEEN	CARTERS, a division of CARTER HOLT HARVEY LIMITED Applicant/Plaintiff
AND	DANIEL JOHN CANCIAN Respondent/Defendant

Hearing:	20 June 2018
Appearances:	P J Morris for Applicant/Plaintiff D Weaver/D M Simpson for Respondent/Defendant
Judgment:	22 June 2018

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by me on

22.06.18 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Stace Hammond, Hamilton Firma Consulting Ltd, Tauranga Counsel:

D P Weaver, Tauranga

CARTERS, a division of CARTER HOLT HARVEY LIMITED v DANIEL JOHN CANCIAN [2018] NZHC 1496 [22 June 2018]

Introduction

[1] The plaintiff, Carters Limited (Carters) is a supplier of building products. The defendant, Mr Cancian, was the director of Bella Vista Homes Limited (Bella Vista), a residential building company in Tauranga. Bella Vista has failed to make payment to Carters for products supplied.

[2] Carters seeks summary judgment against Mr Cancian in the sum of
$1,078,668.23 together with interest, pursuant to a deed of guarantee and indemnity. Under the guarantee Mr Cancian irrevocably guaranteed to Carters the due and punctual payment of all monies owing by Bella Vista to Carters.

[3] The defendant says he was induced to enter into the guarantee and indemnity by a misrepresentation, namely that the guarantee would be limited to the amount of the credit limit of $50,000.00. That is said to constitute a defence under s 6 of the Contractual Remedies Act 1979 (now s 35 of the Contract and Commercial Law Act 2017).

[4] The critical issue for determination is whether, adopting a robust and realistic approach to the evidence, the plaintiff has demonstrated that the defendant has no defence to the summary judgment application.

Background facts

[5] Bella Vista’s business focussed on constructing residential houses and selling “home and land” packages to first-home buyers. Bella Vista sold housing in a residential development known as “The Lakes”, located on the Tauranga city fringe. House and land packages sold by Bella Vista were pitched at the lower end of the market with sale prices typically less than $550,000.00.

[6] Until late 2016 the preferred supplier of building products and materials for Bella Vista was Placemakers, a trade competitor of Carters.

[7] On 12 October 2016, Mr Green, the East Coast sales manager for Carters, met with representations of Bella Vista, including the defendant. What occurred at that
meeting and whether Mr Green represented to Mr Cancian that the personal guarantee would be limited to $50,000.00, is in dispute.

[8] In his affidavit of 5 February 2018 Mr Cancian states as follows:

[18] Darryn Green advised the credit limit could be set at $50,000.00, but at this level Carters would require my personal guarantee. I was not surprised by the requirement for a guarantee as it is the common practice of most building material suppliers.

[19] However, it is usual practice at least in my experience, that the guarantee is incorporated within the Trade Agreement itself. I was surprised at this guarantee being a separate document.

[20] Being unfamiliar with this practice I advised Darryn Green that I wanted to obtain legal advice as is standard practice and because ordinarily any personal guarantee was part of the supplier agreement itself, wherein it will set out the limit of the guarantee, consistent with the credit limit.

[21] I advised Darryn Green that my personal guarantee with Placemakers was limited to $50,000.00, and that I required the same limitation if I was to change supplier.

[22] Darryn Green told me there was no need for legal advice and assured me that the guarantee was limited to the credit application figure. Furthermore, he would limit the credit application to $50,000 consistent with my personal guarantee.

[23] Mr Green also informed me that he would be unable to progress the application unless the guarantee was signed, and that if I wanted the

$10,000.00 new customer “gift” that he was offering I needed to sign it then and there. He reassured me that my personal guarantee would be limited to

$50,000.00 which was no different to my position with my current Placemakers.

[24] I was keen to obtain the $10,000.00 new customer “gift”, and being assured that the guarantee was limited to the $50,000.00 I signed the guarantee.

[9] On 12 October 2016 Bella Vista and Carters entered into a credit account application in terms of agreement for supply (the agreement). In the application, Bella Vista sought a maximum credit limit of $700,000.00. On the same day Mr Cancian signed a deed of guarantee and indemnity by which he:

(a) Unconditionally and irrevocably guaranteed to Carters the due and punctual payment of all monies which were then or may in the future be owing or remain unpaid by Bella Vista to Carters;
(b) Agreed that if for any reason Bella Vista did not pay when due the guaranteed debt (or any part of it), he would immediately on demand pay the relevant amount to Carters;

(c) Undertook that should the guaranteed debt (or any part of it) for any reason not be recoverable from Bella Vista he would pay to Carters on demand the amount that Carters would otherwise have been able to recover from Bella Vista on a full indemnity basis; and

(d) Agreed that his liability under the deed is that of a principal debtor and not of a surety.

[10] Neither the guarantee and indemnity nor the agreement contained any credit limit. However, under the heading “For office use only” on the Credit Account Application form, there is a handwritten entry of $50,000 being the “approved credit limit”. Next to that handwritten entry is a date stamp bearing the date 13 October 2016.

[11] On 2 December 2016 Carters and Bella Vista entered into a preferred supply agreement. Clause 6.2 of that agreement records a one-off payment by Carters to Bella Vista of $10,000.00 for information technology support. Carters made the payment of
$10,000.00 to Bella Vista in accordance with an invoice dated 22 December 2016. Mr Cancian contends that this was an inducement payment and one of the matters discussed at the meeting on 12 October 2016.

[12] Between November 2016 and October 2017 Carters provided Bella Vista, as a customer, with supplies for which it provided invoices. Bella Vista has failed to make payment and as at 31 October 2017 the amount owing by Bella Vista was
$1,078,668.23.

[13] On 1 November 2017 Carters’ lawyers made demand on the defendant for payment of the debt.

Relevant legal principles

[14] Rule 12.2(1) of the High Court Rules 2016 provides:

The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim or to a particular party of any such cause of action.

[15] The principles are summarised in Krukziener v Hanover Finance Ltd:¹

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried; Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA)’ at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated. MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In

the end, the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

The case for the plaintiff

[16] Carters contends that it is implausible that Mr Green would have dissuaded Mr Cancian from taking legal advice prior to signing the guarantee or that he said to Mr Cancian that the promotion offering new customers a free gift of $10,000.00 would not be available if Mr Cancian did not sign the personal guarantee on the spot. Carters says that it is equally implausible that Mr Green represented to Mr Cancian that the personal guarantee would be limited to $50,000.00.

[17] Carters submits that in adopting a robust and realistic approach to the evidence, the Court should conclude that the defendant has no defence to the claim. Mr Cancian’s evidence is inherently lacking in credibility.

[18] Carters further argued as follows:

¹ Krukziener v Hanover Finance Ltd [2008] NZCA 187; (2008) 19 PRNZ 162 at [26].

(a) The guarantee was in plain English and very clear and easy to understand. It contains no reference to the $50,000.00 limit;

(b) The guarantee is a short document and given Mr Cancian’s experience he would have had a clear understanding that it was not limited in the manner now alleged;

(c) Carters was able to increase the credit limit without notice, up and down, pursuant to clause 2.2 of the agreement. In those circumstances, it would make no commercial sense for Carters to have limited the guarantee to $50,000.00;

(d) It equally makes no commercial sense for Carters to have agreed to a
$50,000.00 limit when what was sought by Bella Vista and Mr Cancian was a $700,000.00 credit facility;

(e) Mr Green was a very experienced and senior employee of Carters and has made in his affidavit in reply a very robust rejection of the allegations made by Mr Cancian.

(f) Mr Green had no authority to limit the personal guarantee and there is no way that he would have risked his credibility or damaged his reputation by seeking, at a meeting with others present, to persuade Mr Cancian from taking legal advice.

(g) There was no urgency in relation to the promotional offer of $10,000 which was a matter addressed at a subsequent meeting to discuss the service level agreement.

[19] Carters submits that the documents speak for themselves. Mr Cancian signed the guarantee and his signature has been witnessed. It is not limited to $50,000.00. The guarantee contains a section by which each guarantor acknowledges that they have had the opportunity to seek independent legal advice before signing the guarantee
and have either obtained such independent legal advice or, elected not to seek such independent legal advice.

[20] The guarantee also contains a clause in which the guarantor acknowledges that they have read and understood their obligations to Carters under the guarantee and enter into the guarantee voluntarily.

Mr Cancian’s defence

[21] Mr Weaver on behalf of Mr Cancian referred to the credit limit being set at
$50,000.00. This is clear and undisputed and apparent from the handwritten entry on the credit application form next to the date of 13 October 2016.

[22] This evidence, so it is argued, supports Mr Cancian’s contention that this was the amount that was represented to him as being the level of his personal guarantee. Mr Cancian says in these circumstances he has an arguable defence. He relies upon the Court of Appeal Decision Scales Trading Ltd v Far Eastern Shipping Co Public Ltd² for the proposition that the discretion as to relief under s 9 of the Contractual Remedies Act 1979 or equitable vitiation under the general law allows for the guarantee to remain in force, but only to the extent that the debt excludes the non- disclosed/misrepresented element.

Analysis and decision

[23] I accept that there is good reason to be sceptical of the evidence of Mr Cancian that Mr Green, Carters’ East Coast manager, sought to dissuade him from taking legal advice and said that he needed to sign the personal guarantee on the spot if he wished to take advantage of the new customer “gift” of $10,000.00. However, I find that I cannot credibly conclude that the evidence of Mr Cancian is so implausible or inherently lacking in credibility that I can ignore it.

2. Scales Trading Ltd v Far Eastern Shipping Co Public Ltd [1999] 3 NZLR 26 at 41. The Court of Appeal decision was overturned by the Privy Council in Scales Trading Ltd v Far Eastern Shipping Co Public Ltd [2001] 1 NZLR 513 PC but the legal principle that Mr Cancian relies on was not disturbed. Counsel also referred to Newman Tours Ltd v Ranier [1992] 2 NZLR 68.

[24] Whatever scepticism might be justified, there is in my view an arguable defence that Mr Cancian was induced by a representation namely, the limit of
$50,000.00, in entering and signing the guarantee. On this basis, there is an arguable defence under s 6 of the Contract Remedies Act 1979.

[25] In reaching that conclusion I acknowledge the force of Mr Morris’ submission that the personal guarantee document is not limited in any way, that it is a short form document expressed in clear and plain English and that Mr Cancian, an experienced businessman, would have known what he was signing. Had there been no independent documentary evidence of the credit limit being set at $50,000.00, the matter might have been more finely balanced.

[26] In my view there are clear, material conflicts in the evidence directly relating to the issue of whether there is an arguable defence of misrepresentation. Even allowing for a robust and realistic assessment of the evidence I find that the plaintiff has not met the onus of demonstrating that the defendant has no defence to the claim.

[27] There is a material conflict of evidence in relation to the following issues:

(a) Whether it was Carters or Bella Vista who took the initiative in ultimately securing Bella Vista as a customer of Carters. Mr Cancian says that Carters was very keen to have Bella Vista’s business and actively sought to secure the agreement;

(b) Whether Mr Green represented at the meeting on 12 October 2016 that the personal guarantee would be limited to $50,000.00; and

(c) The number and timing of the meetings and whether pressure was placed on Mr Cancian to sign the deed of guarantee and indemnity on the spot.

[28] My conclusion that there is an arguable defence of misrepresentation is based on the following:

• (a) There is clear, documentary evidence that the credit limit was set at

$50,000.00. Mr Cancian says that his personal guarantee for Bella Vista’s credit facility with Placemakers was limited to $50,000.00. As an experienced businessman, it is plausible that he would seek to have the same limit to any personal guarantee in favour of Carters;

(b) Mr Cancian says that based on his experience guarantees are normally incorporated within the trade agreement itself. I accept Mr Morris’ submission that that is no defence. However, it might provide a plausible explanation as to why he was not concerned or did not object to the fact that the guarantee did not expressly refer to the $50,000.00 limit; his position was protected by the limit being recorded in a companion document.

(c) As noted above, there is some evidence to suggest that Carters was keen to obtain Bella Vista’s business. This includes evidence of an arguable inducement payment and arguably, a willingness by Carters to limit the personal guarantee in the same way that Mr Cancian’s guarantee in favour of Placemakers was limited.

[29] There may well be merit to Mr Morris’ submission that it would make no commercial sense for Carters to agree to a $50,000.00 guarantee limit when clause 2.2 of the agreement enabled Carters to increase the credit limit up or down without notice and when what was being sought by Bella Vista was a $700,000.00 credit facility. However, the problem for Carters is that there is documentary evidence that the credit limit was fixed by Carters at $50,000.00. That is not a figure that has been plucked from the air by Mr Cancian or simply rests on a bald assertion by him.

[30] This case can be distinguished from Krukziener v Hanover Finance Ltd³ where the clauses in dispute were included in a commercial agreement drafted by solicitors for the parties and where the attention of Mr Krukziener and his solicitors had been drawn to Elders’ insistence upon them. Mr Krukziener could not claim that he was

³ Krukziener v Hanover Finance Ltd, above n 1.

induced to enter the contract where he knew the representations to be untrue. The position of Mr Cancian in this case, is otherwise.

[31] The disputed evidence will need to be tested at trial. The high threshold for summary judgment has not been made out by Carters. There is too much doubt.

Result

[32] The application for summary judgment is dismissed.

[33] Costs are reserved.

Associate Judge P J Andrew