WILFRED v LEXINGTON LEGAL LTD [2016] NZHC 2972 [9 December 2016]

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

CIV-2016-409-000139

[2016] NZHC 2972

IN THE MATTER OF

An application for leave to appeal to the

Court of Appeal against the decision of the

Hon. Justice Nation in the High Court

delivered on 30 June 2016 (CIV:2016-409-

139) dismissing the applicant's appeal

against the decision of Judge R E Neave in

the District Court at Christchurch

delivered on 10 February 2016 (CIV:2014-

009-1257)

UNDER

s 67 Judicature Act 1908 and r 20.22 High

Court Rules

BETWEEN

HARMON L WILFRED

Applicant

AND

LEXINGTON LEGAL LIMITED

Respondent

Hearing:

7 December 2016

Appearances:

D J Ballantyne for the Applicant

D M Lester for the Respondent

Judgment:

9 December 2016

JUDGMENT OF NATION J

Application for leave to appeal

[1] Mr Wilfred applied for leave to appeal against my judgment in the High

Court of 30 June 2016 dismissing his appeal against a judgment of the District Court

delivered on 9 February 2016.

[2] The general background to the judgment given for the respondent (Lexington

Legal) is set out in my earlier judgment.1

[3] The judgment reached in the District Court was summarised in my earlier

judgment.2

[4] Mr Wilfred’s appeal to the High Court was advanced on a number of

grounds, all of which were dealt with expressly in my earlier judgment. One of

those grounds was that “the Judge erred in fact and law” by finding that Mr Wilfred

entered into a contract of guarantee and that, under that contract of guarantee, Mr

Wilfred agreed to answer the debt of La Famia No. 1 Limited (LF-1) and La Famia

No. 2 Limited (LF-2).

[5] In my judgment, I referred to the way in which Mr Wilfred engaged Mr

Brown of Lexington Legal to provide legal services for him and particular legal

entities with which he was associated. I referred to an initial email Mr Brown sent to

Mr Wilfred setting out the terms of a client agreement and the reference in that letter

of agreement to clause 7 of the terms of engagement which stated:

If the client is a company or body corporate then the person signing these

terms personally guarantees payment of the account. If the client is a trust

then each of the trustees (jointly and severally) are personally liable to pay

our invoices. This guarantee will be a continuing guarantee and shall not be

discharged by the settlement of account.

[6] I reproduced Mr Wilfred’s email in response to that correspondence and the

way he expressly agreed with Lexington Legal’s terms and conditions “for

proceeding with the case on behalf of Wilfred Investments, La Famia No 2 Ltd

(Wigram Manor) and La Famia Foundation NZ”.3 I referred to the way, pursuant to

clause 7 of the terms and conditions, for Mr Wilfred to be liable on a guarantee, he

had to sign acceptance of the terms on behalf of a company or body corporate. I also

referred to the requirement for any contract of guarantee to be in writing and signed

by the guarantor pursuant to s 27(2) of the Property Law Act 2007. After I

considered the evidence as to how the documents had been signed, I upheld the

1 Wilfred v Lexington Legal Ltd [2016] NZHC 1469 at [2]-[6].

2 At [7]-[8], citing Lexington Legal Ltd v Wilfred DC Christchurch CIV-2014-009-1257, 9

February 2016 [DC decision]. 3 At [41].

District Court Judge’s decision that, by applying s 22 of the Electronic Transactions

Act 2002, Lexington Legal had established that Mr Wilfred had signed the

acceptance of the terms and conditions on behalf of the three entities he had referred

to. On that basis, I upheld the District Court Judge’s decision that he had also signed

an acceptance that he would be liable for the costs of legal work done for those

entities as guarantor.4

[7] In his written submissions, Mr Ballantyne, for Mr Wilfred, summarised two

grounds on which Mr Wilfred wished to appeal my earlier judgment:

Ground 1: Whether the High Court was correct to hold that Mr Wilfred

entered into a contract of guarantee under which he guaranteed payment of

La Famia No 2 Ltd (in liquidation)’s account.

Ground 2: Whether the High Court was correct to hold Mr Wilfred liable

for the sum of $38,310.20 under the LF-2 guarantee when the amounts

invoiced to LF-2 by Lexington Legal totalled $11,539.64.

Principles to be applied

[8] There was no dispute between counsel as to the principles against which this

application had to be considered.

[9] Leave can be granted to bring a second appeal only if the proposed appeal

raises a question of law or fact capable of bona fide and serious argument involving

some interest, public or private, of sufficient importance to out-weigh the cost of a

further appeal.5

[10] On a second appeal, the Court of Appeal is not engaged in the general

correction of error. It’s primary function is then to clarify the law and to determine

whether it has been properly construed and applied by the Court below.6

4 At [34]-[59].

5 Harrison v Keogh [2016] NZCA 545; Snee v Snee [2000] NZFLR 120 (CA) at 125-126; Waller v

Hider [1998] 1 NZLR 412 (CA) at 413. 6 Jessie Alexander (ed) Sim’s Court Practice (online looseleaf ed, LexisNexis) at

[HCR20.22.3(a)].

[11] As is stated in McGechan on Procedure:7

The scarce time and resources of the Court of Appeal are not to be wasted,

nor additional expense for parties incurred, “without realistic hope of

benefit”: Snee v Snee [2000] NZFLR 120, (1999) 3 PRNZ 609 (CA) at 125-

126, 612-613; Waller v Hider [1998] 1 NZLR 412 (CA) at 413. Further, the

Court of Appeal has noted the trend, both in New Zealand and in the United

Kingdom, “to reverse the steady increase in the number of (second appeals)

reaching the Court of Appeal, and so to free up valuable and expensive

judicial resources to give more and more effective attention to hearing first

appeals”: Downer Construction (New Zealand) Ltd v Silverfield

Developments Ltd [2007] NZCA 355, [2008] 2 NZLR 591 (CA) at [36]. In

Chief Executive of Land Information New Zealand v Luke [2008] NZCA 43

at [18], the Court of Appeal explained that that trend reflected the Court’s

fundamental role and the need for proportionality in civil litigation.

Discussion

[12] Mr Ballantyne submitted that I had erred in determining that there was a

contract of guarantee with regard to conclusions I had reached on the evidence but

also in determining that Mr Wilfred’s emailed acceptance of the terms and conditions

constituted a signed acceptance of his liability as guarantor, as required by clause 7

and s 27 of the Property Law Act.

[13] I asked Mr Ballantyne to specify which questions of fact or law were that Mr

Wilfred contended justified consideration by the Court of Appeal. He identified that

one of those questions was “whether contracts of guarantee that expressly require a

‘signature’ are to be read (absence [sic] consent of the party to be bound) as subject

to the Electronic Transactions Act 2002”.

[14] Section 22 of the Electronic Transactions Act provides:

22 Legal requirement for signature

(1) Subject to subsection (2), a legal requirement for a signature other

than a witness’ signature is met by means of an electronic signature

if the electronic signature—

(a) adequately identifies the signatory and adequately indicates

the signatory’s approval of the information to which the

signature relates; and

7 AC Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at

[J67.02].

(b) is as reliable as is appropriate given the purpose for which,

and the circumstances in which, the signature is required.

(2) A legal requirement for a signature that relates to information

legally required to be given to a person is met by means of an

electronic signature only if that person consents to receiving the

electronic signature.

[15] Mr Ballantyne accepted that there was no judgment from either the High

Court or the Court of Appeal suggesting the provisions of s 22 do not apply to a

signature required on a guarantee. He accepted that the proposition Mr Wilfred thus

wished to advance in this regard in the Court of Appeal was “novel”.

[16] The wording in s 22 is unambiguous. It is clear from s 22(1) that it allows for

a signature to be provided by way of an electronic signature wherever there is “a

legal requirement for a signature other than a witness’s signature”. I accept the

submission of Mr Lester for Lexington Legal that there is no basis on which it can be

seriously argued that those words should be applied as if they referred to wherever

there was “a legal requirement for a signature other than in relation to a guarantee or

a witness’s signature”. I note also that the contention which Mr Wilfred wishes to

advance in this regard before the Court of Appeal was not advanced when this issue

was dealt with in either the District Court or the High Court.

[17] Mr Ballantyne also argued that, in relation to this potential ground for an

appeal, the Court of Appeal should consider whether the wording of clause 7 of the

terms of engagement required the signature of the potential guarantor to be in writing

and not by way of an electronic signature.

[18] In this regard, the question which he says the Court of Appeal should

consider relates to a specific contract between these parties and is thus not one of

public importance.

[19] Again, I accept the submission of Mr Lester that the interpretation which Mr

Wilfred seeks to advance is not seriously arguable. Clause 7 referred to the potential

for a guarantee from a person “signing” the acceptance for a company or body

corporate. The terms of engagement and the particular requirements as to

acceptance of the guarantee have to be interpreted in the context of the dealings

which the parties had with each other. Mr Brown of Lexington Legal emailed the

terms of engagement to Mr Wilfred with an emailed letter of 4 June 2011 in which

he stated:

If you agree with and accept the information in this letter and the

accompanying material, please sign below where indicated and return to me.

If you let me know some other way (eg by phone or email) that you want me

to act for you, you will be bound by these terms.

[20] In response to that letter, Mr Wilfred emailed confirming acceptance of the

terms and conditions for work done in relation to the three entities already referred

to.

[21] In relation to the second proposed ground of appeal, Mr Ballantyne argued

that the Court of Appeal should be able to consider the question of whether or not

clause 7 of the terms of engagement required the principal debtor to be issued with

an invoice before the guarantor could be liable in relation to any costs for which the

principal would have been liable.

[22] Mr Ballantyne wishes to argue on appeal, as he did both in the District Court

and the High Court, that Mr Wilfred could not have been liable as a guarantor with

regard to costs of $24,994.92 which had originally been invoiced to LF-1. In

accepting Lexington Legal’s terms and conditions, Mr Wilfred had specified the

three entities for whom the work was to be done as those I mentioned earlier. They

did not include LF-1.

[23] Mr Ballantyne argued that this question was one of public importance, for if a

guarantor could be sued without an invoice having been issued to the principal

debtor, that would deprive those using legal services of the protection and benefits of

specific provisions of the Lawyers and Conveyancers Act 2006 and rules under that

Act which require solicitors to render accounts for costs and allow for complaints in

relation to those costs to be made to the Law Society. Mr Ballantyne argued that Mr

Wilfred became liable for this portion of these costs only when the Court gave

judgment against him and he thus never had the opportunity of complaining to the

Law Society about these costs.

[24] I do not accept that in the particular circumstances of this case there is a

question which justifies consideration by the Court of Appeal for that reason. There

was nothing to stop Mr Wilfred complaining about the level of costs invoiced

originally to LF-1 if that was of concern to him. There was no suggestion in the

District Court or on appeal that Mr Wilfred did not understand the terms and

conditions which had been presented to him, setting out the basis on which

Lexington Legal would act for him. He thus knew, or at least should have known,

that he could be potentially liable for those costs as guarantor. When first presented

with the invoice, the only objection he made in relation to it was that the wrong

company had been invoiced. It should have been LF-2. He could however at that

stage have also objected to the reasonableness of the fees had he wished to do so.

When a claim was made against him in the District Court for the costs of the work

done as originally summarised in that invoice, he could also have challenged the

reasonableness of the fees through a complaint to the Law Society if he wanted to do

so.

[25] I also accept Mr Lester’s submission that the issue which Mr Ballantyne says

is of public importance is hypothetical and does not arise out of the particular facts

of this case. On the evidence, both the District Court Judge and I concluded there

had been no challenge as to the reasonableness of the fees when the claim in relation

to those fees was dealt with in the District Court and when Mr Wilfred was

represented by counsel.

[26] As referred to in my earlier judgment, Mr Ballantyne acknowledged that

clause 7 attempted to bind a director or trustee to a contract of guarantee in parallel

to the primary obligations of the parties to the contract. That was consistent with the

way the parties dealt with each other when the work was done. For reasons

discussed in my earlier judgment, there was a proper evidential basis on which the

District Court Judge could conclude the work for which Mr Wilfred was being held

liable as guarantor was work for which LF-2 was liable, a liability which he had

guaranteed.

[27] In submitting there was a question in this regard which justified the

consideration of the Court of Appeal, Mr Ballantyne cited a passage from

Commercial Law in New Zealand:8

A guarantee is a promise by one person (the guarantor, or surety) to answer

for the debt, default, or liability of another person (the principal debtor).

This promise is made to the creditor of the principal debtor. The promise

involves the undertaking by the guarantor of a secondary liability, that is,

one which arises upon the debtor’s defaulting on his or her primary

obligation to the creditor.

[28] Whether or not an invoice had to be issued to LF-2 before Mr Wilfred could

be sued for costs due from that company involved a consideration of the particular

terms of engagement which it had been found Mr Wilfred had accepted on behalf of

LF-2. That was how the matter was dealt with in both the District Court and the

High Court. The conclusions which both the District Court Judge and I reached in

this regard essentially required a factual determination as to what had been agreed on

the basis of documentation and evidence over which there had been no real dispute.

The proposed second ground of appeal thus does not relate to a question of general

importance to the public.

[29] For the above reasons, I have not been persuaded that the grounds on which

Mr Wilfred seeks leave to pursue an appeal relate to questions of law or fact capable

of bona fide and serious argument involving some interest, public or private, of

sufficient importance to out-weigh the cost of a further appeal.

[30] Even if the appeal could have involved such questions, as Mr Ballantyne

acknowledged was appropriate in his submissions, I would have had to consider, as a

guiding principle, the requirements of justice and what they commanded in the

circumstances of the individual case.9

[31] As Mr Ballantyne referred to in his submissions, Lexington Legal’s claim, as

informally lodged through the forms then being used in the District Court, was for

costs due for legal services provided by Lexington Legal for a number of entities,

namely, LF-2, La Famia Foundation and Wilfred Investments. Lexington Legal was

8 Commercial Law in New Zealand (online looseleaf ed, LexisNexis) at 25.1.1.

9 Greig v Hutchinson [2015] NZHC 3067 at [9], citing Waller v Hider, above n 5, at 413.

engaged under some pressure to embark on work for those entities at the direction of

Mr Wilfred. He was an experienced businessman. It was clear from the documents

presented to him that, if he accepted the terms of engagement on behalf of any

company, he would have to guarantee that company’s liability. The work was done

for him. As referred to in my judgment, at various times he acknowledged the work

that had been done for him and expressed gratitude for the forbearance which had

been shown in terms of that work being costed. On the evidence, there was no

dispute as to the reasonableness of the fees for which LF-2 and Mr Wilfred as

guarantor were liable. Mr Wilfred has sought to avoid liability as guarantor on

various grounds which have now been considered carefully in both the District Court

and the High Court.

[32] Lexington Legal has not been paid for the services which it provided. The

amount at issue is of some importance. The amount due, as stated in the judgment

given in the District Court on 9 February 2016 and subsequently upheld by the High

Court, was for $38,310.20 together with costs.

[33] In Harrison v Keogh, the respondent sought leave to appeal judgments from

the District Court and the High Court for US$52,312.26. The Court of Appeal

acknowledged that the issues which the applicants wished to pursue by way of

appeal were of importance to the applicants personally but said “those considerations

are outweighed, in our assessment, by the fact the sum at stake is modest and no

question of general or public importance is involved”.10

That is the situation with

Mr Wilfred.

[34] The circumstances of this case are akin to those which were relevant in

Norris v Johnson Price Holdings Ltd where the Court of Appeal had declined Mr

Norris’s application for special leave to appeal.11

Mr Norris was a liquidator who

contested his personal liability for rental arrears accrued while he attempted to sell

the company’s business as a going concern. The Court of Appeal accepted that in

10

Harrison v Keogh, above n 5, at [22]. 11

Norris v Johnson Price Holdings Ltd [2012] NZCA 541.

those proceedings there may have been errors of judicial reasoning, yet still declined

leave because:12

(a) the amount at stake was relatively small;

(b) the primary function of a second appeal is not to correct error;

(c) it was far from certain that Johnson Price would have had an alternative

remedy (as claimed by counsel for Mr Norris) were it to be deprived of

its judgment; and

(d) Mr Norris’ position was “not a particularly deserving one”. He had

given an assurance which he had failed to honour and without which

Johnson Price would never have agreed for the lease to continue. He had

sufficient funds to pay the rent when it was due but failed to do so.

Moreover, although he failed to pay this debt, he did pay his own

management company and other lesser priority debts.

[35] For all the above reasons, I conclude that the proposed appeal does not satisfy

the threshold for granting leave. Leave to appeal is accordingly declined.

Application for stay

[36] On 28 July 2016, at the same time as Mr Wilfred filed his application for

leave to appeal, he sought orders staying enforcement of the costs order contained

within my judgment of the High Court on 30 June 2016 and enforcement of the

decision of the District Court delivered on 9 February 2016. In making that

application, Mr Wilfred referred to the grounds on which he wished to pursue an

appeal to the Court of Appeal and contended that, if Mr Wilfred’s application for

leave to appeal was granted, the Court’s role in balancing the right of Lexington

Legal to enforce the decisions of the District Court and High Court against Mr

Wilfred’s right to have his appeal considered by the Court of Appeal favoured a stay.

[37] Lexington Legal contends there are no grounds warranting the granting of a

stay. In its notice of opposition and in an affidavit from Mr Brown, Lexington Legal

12

At [30] (citations omitted).

refers to the fact that, immediately after the District Court judgment was released,

Mr Wilfred’s solicitor advised there would be an appeal and an application for a stay.

Lexington Legal’s counsel made an offer to accept a stay if the money due under the

District Court judgment was paid into a trust account. There was no response to that

proposal. In the absence of any response, Lexington Legal issued a bankruptcy

notice. Mr Wilfred filed an application dated 25 May 2016 to stay or amend time for

compliance with the bankruptcy notice. That application was opposed. The

application was set down for hearing on 14 July 2016. Immediately prior to the

hearing, Mr Wilfred’s counsel withdrew the application. Costs and disbursements

were awarded against Mr Wilfred in the sum of $2,451.56, which remains unpaid.

[38] In his affidavit opposing the application for a stay, Mr Brown annexed a

judgment of 15 March 2016 by which different plaintiffs had obtained a judgment

against Mr Wilfred for the sum of $87,840 and costs.13

[39] Counsel advised me that the application for an order adjudicating Mr Wilfred

bankrupt is now scheduled to be heard in the High Court on 15 December 2016.

[40] The judgment which Lexington Legal seeks to enforce is for legal costs for

work done between 2011 and 2013. Lexington Legal is entitled to payment pursuant

to judgments of both the District Court and the High Court. An appeal does not

operate to stay the effect of the judgments obtained. Leave to appeal has now been

declined by the High Court.

[41] It is possible that Mr Wilfred may wish to seek special leave from the Court

of Appeal to pursue and appeal, especially as I was told he does not have the means

to make the payments that are due under the existing judgments. The potential for

such an application to be made does not justify any further stay of the judgments

obtained. It has not been suggested Mr Wilfred would be unable to recover from

Lexington Legal any amount that it might be required to refund to him in the event

of his ultimately being successful in the Court of Appeal on both an application for

special leave and an appeal itself. At present, I would assess the prospects of Mr

Wilfred obtaining special leave from the Court of Appeal and of eventually obtaining

13

Gan v Wilfred [2016] NZDC 4217.

a judgment in his favour as being limited. If, however, he were to be ultimately

successful, it is likely that Mr Wilfred would be able to recover from Lexington

Legal the amounts he had paid to it on the existing judgments. Mr Brown would

face considerable difficulty in carrying on with his legal practice if he did not meet

any liabilities he might have to Mr Wilfred resulting from such a potential outcome.

Mr Ballantyne acknowledged he could not suggest otherwise.

[42] For those reasons, Mr Wilfred’s application for stay of the judgments referred

to is refused.

Costs

[43] Mr Wilfred has been unsuccessful on his application for leave to appeal and

for a stay of the judgments given against him. Lexington Legal is entitled to costs on

these applications on a category 2 basis. If there is any disagreement as to the

quantum of those costs, memoranda are to be filed by 31 January 2017. The

memoranda are to be no longer than three pages. I will deal with any such dispute

on the basis of those memoranda.

Solicitors: Lexington Legal, Kaiapoi Canterbury Legal, Christchurch.