Westpac New Zealand Ltd v Chahil
The High Court in Auckland refused Westpac summary judgment against an individual on the guarantee of a loan as a trustee. Mr Singh was a party to an interlocking unlimited guarantee and indemnity together with three family trusts (of which Mr Singh was a trustee), a family company and another individual in favour of Westpac. Mr Singh was clearly identified as a guarantor, first without qualification and then quite separately as a trustee of each of the trusts. Summary judgment was refused on the basis that it was arguable the guarantee had the effect of limiting Mr Singh's liability to the assets of the trust, even though it was apparent that he had not only signed the guarantee on three separate pages as a trustee of each trust but also on a fourth page in his personal capacity.
Mr Singh contended that Westpac had not communicated with him in any way or obtained a statement of his position so as to put him on notice that he was being asked to guarantee personally. The guarantee document stated that "[the clause limiting the trustee's liability under the guarantee] only applies if you are a trustee and sign this document as trustee of that trust. This document will bind you as a trustee of that trust. It will also bind you personally unless you are an independent trustee." Mr Singh is a trustee and had signed the guarantee as such, moreover he considered he is an independent trustee. The Court stated that, due to family circumstances involving adoptive vs. natural parents, there was room for argument as to whether Mr Singh was indeed independent of one of the trusts. The Court acknowledged Westpac's submission that the above clause does not apply where a guarantor has signed personally and as trustee of a trust, but was not satisfied that Mr Singh had no defence. It was arguable that the wording of that clause had the effect of limiting Mr Singh's liability to the assets of the trust even though he appeared on the face of the document to have signed it in his personal capacity as well as trustee.
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