National Bank of New Zealand Ltd v Cook Islands Development Company Ltd [1982] CKHC 6; Plaint 49.1981 (11 October 1982)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA

(CIVIL DIVISION)

PLAINT NO: 49/81

BETWEEN

THE NATIONAL BANK OF NEW
ZEALAND LIMITED a duly incorporated
company having its registered office at
Wellington in New Zealand,
PLAINTIFF

AND

COOK ISLANDS DEVELOPMENT
COMPANY LIMITED a duly
incorporated company having
its registered office at Rarotonga
DEFENDANT

Mr McFadzien for the Plaintiff

Mr Arnold for the Defendant

Date of Judgment: 11^th Day of October 1982

JUDGMENT

On the 1st June 1975 the Plaintiff Bank agreed to make advances and other Banking accommodation available to the Manu-Rere Shipping Company Limited supported by a Guarantee in favour of the Plaintiff executed by the Cook Islands Co-operative Wholesale Society Limited; Mitiaro Trading Company Limited; and Cook Islands Development Company Limited the Defendant Company.

The Bank Guarantee is expressed as being joint and several; and that "the liability of the Guarantors under guarantee is limited to the sum of $5000.00."

Mr McFadzien concedes that at the time the Cook Islands Co-operative Wholesale Society Limited went into receivership the Company paid or had paid to the Plaintiff a total sum of $904.17 as its contribution under the Guarantee and that the Plaintiff accepted those funds on that basis and on that understanding. In making submissions on this point it was further conceded that some of these funds had been paid to the Plaintiff prior to the 19th of August 1976 (the date when the Plaintiff made demand on the Defendant) and the balance paid subsequent to that date. No evidence was presented as to the exact amounts paid or the dates of payment although it was conceded that the sum of $904.17 had been paid. The short issue in dispute on these proceedings is whether the form of the Guarantee entitles the Plaintiff to recover $5000 and interest on such amount; or, as claimed by the Defence, $5000 less the previously mentioned payment of $904.17 and interest on that reduced amount.

Mr McFadzien claimed in the course of his submissions that the Guarantee entitled the Plaintiff to recover $5000 from the Defendant Company; that payment by the Cook Islands Co-operative Wholesale Society Limited of $904.17 did not affect the Defendant's liability of $5000 under the Guarantee; and that in effect the Guarantee entitled the Plaintiff to recover up to $5000 from each of the three guarantors which had signed it, that is a total of $15,000.

Mr Arnold for the Defendant conceded liability under the Guarantee for $4095.83 (i.e. $5000 less the payment already made of $904.17) together with interest as provided for in the Guarantee.

The Plaintiff pursuant to its rights under the Debenture made demand on the Defendant on the 19th August 1976 which is acknowledged, and it is from that date that interest is to be calculated.

Mr McFadzien relied in particular on Clauses 1-2-3 and 15 of the Guarantee which he claimed entitled the Plaintiff to recover the sum of $5000 from the Defendant on the basis that each Guarantor was liable for that amount. I do not accept that submission.

This Guarantee expressly provides that the three guarantors "hereby jointly and severally covenant and agree with the Bank as follows:-" It is therefore the normal joint and several guarantee which is standard in modern banking practice and usage. Clause 15 of the Guarantee states as follows:

"15. The liability of the Guarantors under this guarantee is limited to the sum of FIVE THOUSAND DOLLARS ($5,000.00) and a sum equal to one year's interests thereon at the rate charged by the Bank to customers on overdrawn accounts of a like nature to the account hereby guarantee at the date when demand hereunder shall be made on the Guarantors and the costs and expenses incurred in obtaining or endeavouring to obtain payment of such moneys together with compound interest on the sum demanded and on such costs and expenses until actual payment at the rate aforesaid calculated with half-yearly rests on the usual days for balancing the books of the Bank and computed in respect of the sum demanded from the date of the demand and in respect of such costs and expenses from the date of the same having been paid."

This clearly and explicitly sets out the limitation of the guarantors liability of $5000 under the joint and several guarantee. If as Mr McFadzien claimed each guarantor was liable to $5000 and the Plaintiff could therefore make three claims of $5000 then the Guarantee would have said:

"The liability of each Guarantor under this guarantee is limited to the sum of $5000..."

It doesn't say that. Rather it says:

"The liability of the Guarantors under this guarantee is limited to the sum of $5000..."

Reference to the clause 1 which deals with the extent of the guarantee; and clause 3 which covers the question of waiver do not in my opinion in any way affect modify or alter the provisions of clause 15 which clearly sets out the extent of the Guarantors (plural) liability of $5000.

I find therefore that the Plaintiff is entitled to Judgment as follows:

(a) The sum of $4095.83.

(b) One years interest thereon from the 19/8/76 to the 18/8/77 at 8½ %.

(c) Compounded Interest from the 19/8/77 to the date of this Judgment.

(d) Costs to the Plaintiff as per scale as on a Defended hearing.

Judge