Westpac v Zama [2015] SBHC 28; HCSI-CC 368 of 2011 (14 April 2015)

IN THE HIGH COURT OF SOLOMON ISLANDS
Civil Jurisdiction
(Maina J)

Civil Case No. 368 of 2011

BETWEEN:

WESTPAC BANKING CORPORATION
Claimant

AND:

FRANCIS ZAMA
Defendant

Date of Hearing: 6th March 2014
Date of Judgment: 14th April 2015

Mr. Radclyffe A for the Claimant
Mr. Desmond N for the Defendant

JUDGMENT
Maina J:

Introduction

The Claimant is suing the Defendant Francis Zama, a guarantor for the repayment of all debts (loans), interest and cost owed by Smart Solomon Limited (SSL) to the Claimant. The SSL has failed to repay the loans and the Defendant also failed to repay the loan. The Claimant claims from the Defendant the sum of $5,934,360.59 together with interest at the Claimants prevailing rate from 15th September 2011. The costs and other orders as the Court thinks fit.

Brief Background

The Defendant is a Director and shareholder in the SSL and he is a guarantor of SSL by virtue of a guarantee dated 27th April 2006 which the Defendant with two other guarantors jointly and severally guaranteed repayment of all debts, interest and cost owed by SSL to the Claimant.

Defendant failed to repay the loan by the debtor and notice of demand was served on him dated 27th April 2009.

Claimant obtained a judgment by consent against the SSL in the case HC/CC No. 453 of 2009. And the SSL was sold by tender for the value of $3.5m but the sale

was not able to satisfy or pay all debts, interests and costs owed by SSL to the Claimant.

As at 26th July 2013 the debts and interest owed by SSL to the Claimant is $6,098,336.27 and Claimant seek judgment against the Defendant on the guarantee in the said sum of $6,098,336.27, interest and cost.

Claimant claim the debtor has failed and Defendant by virtue of a guarantee executed on dated 27th April 2009 "guarantor" is liable for all the outstanding unpaid loans or all debts, interest and costs owed by SSL to the Claimant.

Claimants claim $5,934,360.59 together with interest at the Claimants prevailing rate from 15th September 2011 for the debts and interest owed by SSL to the Claimant.

Issue

The issue is whether the sale of SSL properties discharged the liability of the Defendant as guarantor.

The Defendant denied the claim and presented a defence that the dispose of the property by the Claimants in judgment HC/CC No. 453 of 2009 against the principle debtor (SSL) has discharged the liability from the Defendant. And the sale of SSL property by the Claimant was undervalued negligently at $3.5m has discharged the liability of the Defendant and same debts cannot be charged against the Defendant. And the guarantee provided in the HC/CC No. 453 of 2009 does not amount to personal undertaking to pay the debts for the principal debtor (SSL).

Counsel for the Defendant made references to some common law cases and the extract provided to me with quotes deals with guarantee issues. While they are as so, it is important to realise with the guarantee that it defend on the construction. One common requirement is a notice of demand that the debtor has fail to pay the debts. If no security is provided over property the Court process to impose that liability on the guarantor may be invoked. It would be upon that liability by order of the Court further action may proceed against the guarantor.

Claimant relied on the sworn statement of Gideon Omokirio an employee and Loans Management Officer for the Claimant.

The Guarantors are Shareholders and Directors of the Debtor company and requested the Claimant for guarantee which they executed on 27th April 2006 under individual undertakings for bearing to sue forthwith in respect of the advances or accommodations or all debts, interest and cost owed by SSL to the Claimant. The other guarantors are Mrs Renagi Zama and Jonathan Zama. And Clause 27 imposes liabilities upon them severally or jointly.

A notice of demand for repayment of the debts was dated 27th April 2009 and the notice was served on the Defendant. And Claimant obtained judgment by consent against SSL in the High Court Civil Case No. 453 of 2009 on 10th March 2010.

Guarantor is somebody who assumes debts or somebody who gives a guarantee, especially a formal promise to be responsible for somebody else's debts or obligations. It is well accepted in the common law jurisdictions and in this jurisdiction that a guarantee be in written form or signed by the parties to be binding or a person promise to responsible for somebody else's debts.

It depends on the construction of the guarantee and with this one, the guarantee is unlimited or guarantor undertake to the liabilities until the debts is fully recovered or paid. Clause 5 of the Guarantee states that this guarantee shall be a principal obligation and shall not be treated as ancillary or collateral to any other obligation whatsoever etc.

For the purpose of recovering the debts by the Claimant, the judgment by consent in HC/CC No. 453 of 2009 authorised the sale by tender of the fixed term estates in Parcel No. 191-041-74 and 191-016-52. In other words, the sale was by leave of the Court and the accepted price at the tender was $3.5m. A price determined on the method approved by the Court. The sale of the properties was unable to pay up the advances or accommodations or all debts, interest and costs owed by SSL to the Claimant.

With the liability of the Defendant, Clause 5 of the Guarantee states that he takes the principal obligations and or which shall not be treated as ancillary or collateral to any other obligations whatsoever etc and Clause 27 of the guarantee imposes the Defendants the liability for all debts, interest and cost owed by SSL to the Claimant either separately or severally. In other words Defendant is liable for the debts either alone or jointly with others.

By the guarantee executed on the 27th April 2006 by the Defendant and other's liabilities is unlimited and Defendant jointly or severally liable for repayment of debts, interest and costs owing by SSL to the Claimant.

I am satisfied with the Claimant's claim therefore the Defendant is liable for all the outstanding unpaid loans or all debts, interest and costs owed by SSL to the Claimant and or after the sale of the properties of SSL by the order of the Court in case HC/CC No. 453 of 2009.

However, the Counsel for the Claimant seeks judgment for $1,051,426.71 interest from 23rd February 2015 and costs.

ORDER

1. The guarantee executed on the 27th April 2006 by the Defendant is unlimited and the sale of SSL properties did not discharge the liability of the Defendant as guarantor.
   
2. Judgment for Claimant for $1,051,426.71 interest from 23rd February 2015 and costs.
   

The Court

.................................................................
Justice Leonard R Maina
Puisne Judge