Club Securities Ltd v Hurley HC Auckland CIV-2006-404-3221, 31 October 2007
- Court
- High Court
- Judgment
- 31 October 2007
Areas of law
Judgment analysis
AI-generated summary
It can misstate holdings, facts, or citations. Always confirm against the judgment PDF.
Facts
Club Securities Ltd, acting as an agent for Roof Doctors Ltd (RDL), sold franchise rights for a roof resurfacing product. Mr Hurley responded to a newspaper advertisement and on 24 June 2002, entered into an unconditional written agreement with Club to purchase shares in a company holding the Southland distribution rights for $120,000. Settlement was due on 1 July 2002. Contemporaneously, Mr Hurley signed a document acknowledging he was indebted to Club for $120,000 and covenanted to repay the sum 'by the 1st of July 2002'. Mr Hurley failed to pay on the due date and purported to cancel the agreement on 26 July 2002. Club issued proceedings in the District Court and applied for summary judgment, which was refused. Club appealed that refusal to the High Court.
Held
- An instrument containing an unconditional promise to pay a sum of money 'by' a fixed future date satisfies the requirement of being payable 'at a fixed or determinable future time' under s 84 of the Bills of Exchange Act 1908, and is therefore a valid promissory note. The option for the promisor to pay earlier than the fixed date does not create a contingency that would invalidate the instrument's status as a promissory note.
- Affirmative defences and counterclaims based on the underlying contract, such as allegations of misrepresentation under the Fair Trading Act or Contractual Remedies Act, or illegality under the Securities Act, do not constitute defences of invalidity, illegality, or total failure of consideration to a claim on the promissory note itself.
Orders
Appeal allowed. Judgment is entered for Club Securities Ltd for $120,000, together with interest at 7.5% from 1 July 2002. Execution of the judgment is stayed on the conditions that Mr Hurley pays the judgment sum and interest to the Registrar of the District Court and takes all possible steps to obtain a priority fixture for the trial of his counterclaim.
Principle behind the example
The High Court of New Zealand is not bound by previous decisions of the English Court of Appeal.
“However, the High Court of New Zealand is not bound by previous decisions of the English Court of Appeal”Read paragraph [38] in the judgment
Key passages2
The decision of whether or not an instrument is a promissory note is to be made by reference solely to the document itself in its contractual setting; oral evidence has no bearing on the issue.
“Oral evidence has no bearing on the issue of whether or not an instrument is a promissory note. That decision is to be made by reference solely to the document itself in its contractual setting.”
A claim for unliquidated damages under a contract of sale is no defence to a claim under a bill of exchange accepted by the purchaser; nor is it available as set-off or counterclaim, unless it be a total or quantified partial failure of consideration.
“It is in my opinion well established that a claim for unliquidated damages under a contract of sale is no defence to a claim under a bill of exchange accepted by the purchaser; nor is it available as set-off or counterclaim. This is a deep rooted concept of English commercial law... The bill is itself a contract separate from the contract of sale. Its purpose is not merely to serve as a negotiable instrument; it is also to avoid postponement of the purchaser’s liability to the vendor himself, a postponement grounded on some allegation of failure in some respect by the vendor under the underlying contract, unless it be total or quantified partial failure of consideration.”
Cases mentioned in judgment
Legislation mentioned
- District Court Rules, R154(5), R515
- Bill of Exchange Act 1908, s 3, s 84, s 90
- Securities Act 1978, s 37, s 37AH(1)
- Contractual Remedies Act 1979, s 7, s 9
- Fair Trading Act