In Milloy v Dobson [2016] NZCA 25, the Court of Appeal dismissed an appeal and cross appeal from the original High Court decision on the proper apportionment of liability under a bank loan.  The dispute concerned a claim in contribution made between co-guarantors.  The Court of Appeal, in agreement with the High Court, found that the equitable presumption that co-guarantors contribute equally had been displaced on the evidence of a clear intention of unequal sharing. 

The normal rule is that an equitable right to contribution means that co-guarantors will share responsibility equally:Trotter v Franklin [1991] 2 NZLR 92 (HC).  However, the courts may adjust that rule and apportion contribution unequally in order to produce a just result.

In this case, Mr Dobson's house had been sold to meet his obligations under a guarantee given by him, and Messrs Milloy and Reid. Mr Dobson sought to recover the amount of proceeds from the sale of his house applied by the bank to the portion of liability held by Mr Milloy.  The High Court found Mr Dobson liable for 17.33% of the debt, with Messrs Milloy and Reid each liable for 43.33% of the debt.  Central to that finding was a deed of contribution and indemnity dated 2007 (2007 Deed), which provided for agreed apportionment of liability in those terms.  There was also a further unexecuted deed contribution and indemnity dated 2009 (2009 Deed), which again provided for the same apportionment.

However, the kink in an otherwise clear case was that there were two facilities, and two sets of guarantees in each of 2007 and 2009.  When payment ceased under the 2009 facility, the bank called upon the 2009 guarantees, and since the 2009 Deed was unexecuted, it could not be assumed that the 2007 Deed constituted an express or implied agreement as to liability for the amounts due.  However, what the 2007 Deed did show was an intention between the guarantors that they would share liability unequally.  Further, it was held just, in the circumstances, to return to the last point of agreement in force between the parties - the 2007 Deed.

On that basis, the Court of Appeal rejected Mr Dobson's appeal.

Furthermore, the Court of Appeal upheld the findings of the High Court that there was no conduct disentitling Mr Dobson from relief.  The Court also dismissed the appellant's counterclaim alleging breach of fiduciary obligations owed to them.

See Court decision here.